Twitter icon Email alerts icon Latest News RSS icon Magazine icon Stay connected:

View the article online at http://citywire.co.uk/wealth-manager/article/a632488

What will it take to unleash the cash locked up in credit?

by Sarah Miloudi on Nov 08, 2012 at 08:57

What will it take to unleash the cash locked up in credit?

There has been much speculation on when value could lure investors back into equities, but signs this is already underway may be misleading.

The latest data from the Investment Management Association (IMA) showed that bond funds were no longer the favoured draw in September. The month saw net retail inflows of £541 million into equity funds, a return to their 2011 peak, while fixed income funds attracted a net £320 million. This was the lowest net monthly sales total for bond funds in 12 months.

But dig a little deeper and it seems fears about political uncertainty and low growth are still unnerving investors. In the days and weeks after the IMA released its data, equity fund sales started to peter out.

Since May, the equity-bond yield ratio has almost consistently been in favour of equities over credit, using the iShares FTSE 100 as a proxy for the UK’s main index.

While this indicator has historically been used by investors to analyse buy signals in equities and credit, according to consultancy EPFR Global, which monitors flows between mutual funds, fears about Europe and wider economic woes now swamp any positivity surrounding equities, forcing investors to hold on to credit. 

This is evident in flows into bond funds, which recorded their biggest inflow since May in the final week of September as the picture turned sour in Spain and a bailout looked certain.

Moreover, while global equity funds attracted $1.8 billion in inflows during the week ended 26 September, bond funds took in a whopping $7.6 billion, seeing them maintain their steady 52-week lead over equities.

Adding to this, while the IMA statistics show that retail investors have been busy topping up on equities, a different picture emerges when the views of professional investors are crunched.

The latest quarterly Wealth Manager survey, which canvassed leading private client investment managers about their latest asset allocation calls, found they are warming to equities but not recycling money into the asset class by reducing their bond holdings.

There has been a shift into equities, on aggregate, over the past three months, but this is vastly different from a wave of investors moving from one asset class into another.

Sign in / register to view full article on one page

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Sponsored Video: Bringing it all back home


As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

Sponsored Video: Barings on investing in Frontier Markets


From Nigeria to Pakistan and from Kenya to Kuwait, frontier markets are catching investors' attention as never before.

More about this:

More

  • ishares FTSE 100
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

More from us

Archive

On the road

Click here to find out more from the Audience Development team.

Sorry, this link is not
quite ready yet