Retail investors back passive funds to ride out market turbulence
Retail investors piled into passive funds last month as they sought safety in blue chip stalwarts amid market turbulence, fresh data has revealed.
Some 80 per cent of the most bought funds in April were passive funds, up from seven in March, according to fresh data from retail investment platform Interactive Investor.
Analysts at the firm said soaring inflation and geopolitical jitters had spooked investors and led them to scramble for steadier ground.
“Investors are seeing the glass half-empty at the moment, and who can blame them given the various headwinds that threaten to destabilise markets,” said Kyle Caldwell, Collectives Specialist, Interactive Investor.
“Reasons to be bearish include Russia’s invasion of Ukraine, inflation at its highest level in decades, and interest rates moving higher.
Caldwell said caution had caused investors to pile into passive funds that aim to simply mirror the performance of an index in a bid to ride out the worst of the turbulence.
The two active funds that had continued to attract investors in April were Fundsmith Equity, which topped the list of most-popular funds among customers, while Baillie Gifford Positive Change which was ninth.
It comes just one day after Hargreaves Lansdown found that passive funds had been a major draw for younger UK investors in the past month..
Fidelity Index World topped Hargreaves Lansdown’s most popular list of funds for investors aged 18-29 in stocks and shares ISAs and LISAs, according to data from retail investment platform Hargreaves Lansdown.
Hargreaves analyst Emma Wall said it showed younger investors were willing to look beyond short term turbulence in pursuit of returns,
“With a potential investment horizon of half a century in the case of a personal pension, inflation’s impacts – however painful in the present – are transitory and a broad-based competitively priced passive fund can be an excellent option,” she said.