U.K. Stock Pickers Rake In Cash as Investors Snub Index Funds
(Bloomberg) -- Faith in asset managers has finally returned as British investors sidestep index trackers and flock to funds overseen by humans.
Actively managed equity funds in the U.K. raked in 1.3 billion pounds ($1.8 billion) in August compared to just 4 million pounds for their passive rivals, the largest gap since data provider Calastone began tracking the activity in 2015. Stock pickers have hauled in triple the cash of index funds this year, thanks to market volatility and surging demand for sustainable investments.
“Over the past year the raison d’etre of an active asset manager has really come to the fore,” said Calastone Head of Global Markets Edward Glyn. “True active managers have had a chance to show their skill and it has been a great time for them to justify their existence. I don’t see any reason why the flow into active funds should stop.”
While share markets have climbed to successive record highs during the pandemic, they’ve been increasingly rocked by volatility since the outbreak of the coronavirus in March last year. That’s seen stock pickers return to favor and helped fuel the resurgence of an industry that had been plagued by persistent outflows and margin pressures for years.
About three-fifths of the inflows to active funds since November have been to those focused on environmental, social and governance criteria, according to Calastone. While a shift in investor conscience may be a driving force, firms with stronger ESG ratings are seen to have generally performed better during the pandemic and that’s supported their popularity.
“This movement into ESG investing is not a tactical trend, but a move that will be central to investing going forward,” Glyn said.
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