Corporate bond inflows soar in record month for funds

Investors continue to back fixed income helping push retail fund inflows to a new record high for the month

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by James Phillipps on Sep 29, 2010 at 13:16

Corporate bond inflows soar in record month for funds

Investors continue to pile into bond funds, pouring £1.2 billion of net new money into the asset class in August.

Corporate bond funds were the top selling sector drawing in £573 million of retail money with global bond and strategic bond funds the third and fourth most popular choices, according to the Investment Management Association’s latest figures.

Indeed, corporate bond fund sales were at their highest level since May 2009, pushing the absolute return sector, which was the top seller in July, back into second place.

Overall, the industry saw £2.3 billion of net retail sales in August, above the monthly average of £2.1 billion over the past 12 months, and a new record for the month. Net retail sales have now topped £2 billion for 14 of the last 17 months, although net Isa sales only totalled £157 million, the lowest since August 2009.

Equity fund sales came in at £479 million, with £328 million flowing into ‘other’ funds and £67 million into property.

IMA chief executive Richard Saunders (pictured) said: ‘This year’s high level of inflows continued in August, with £2.3 billion in net retail sales. Although year-to-date sales are slightly behind the record levels of 2009, consumers continue to show a strong appetite for investing in funds.

‘Bond fund sales in August once more reached the peaks experienced in the first half of last year, surpassing the £1 billion mark for the first time since May 2009. Within both equity and bond sectors, we are seeing high levels of sales of sterling denominated securities.’

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8 comments so far. Why not have your say?

Definately time to get out of bond funds. I sold out 6 months ago but this is certain sign that it is time to head for the exit.

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i agree i have just sold all my bonds

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Morning all,

O.K. then joe soap and roy muller what are you into now ?

norm

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Norm,I think roy and joe are into Irish coffee.

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Before everyone "knee-jerks" here, it would be worthwhile understanding why retail funds are pouring into these funds. I have about 15% of my portfolio in bonds and am slowly increasing. The simple reason is that I am semi-retired and looking for a steady income stream to supplement my earned income. If the capital value goes down significantly, it won't really affect me as long as the income keeps coming.

I agree if investors are looking for capital growth, then they are in the wrong place, but I suspect a good proportion of the net inflows are from people trying to secure an income. As long as they accept the possibliliy of capital erosion, what is the problem?

Held in an ISA, a lot of these respectable Strategic Bond funds are paying out 6% and more tax free. If the proce goes down, regular contributions will actually get you an even higher income, (assuming distributions aren't cut wildly).

Just my own thoughts. As ever DYOR.

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its all very well talking about bond funds bubbles but surely it is significant to

differentiate between gilts/investmant grade and high yield/junk bonds ???.

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yes, Lemming, you right, most of the time they mean Gilts, confusing, they should differentiate. CITYWIRE SHOULD CLERIFY.

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reluctant lemming

Oct 03, 2010 at 09:09

As Masud points out it is Gilts ( Guilts ?) being referred to in talk of " Bond bubbles" - but how can this be as tmy understanding is that the gilt price is largely controlled by the coupon/cost relationship., and you would like to think that HMG is "too big to fail" ?! so where and how is the bubble........

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