Sustainable fixed income funds suffered outflows in the first half of 2023 despite the popularity of their traditional counterparts, according to the LSEG Lipper UK ESG Fund Market H1 2023 report.
While inflows have been strong year-to-date for non-sustainable bond funds, netting £9.5 billion, sustainable bond funds saw outflows of £653 million.
“Investors are clamouring for fixed income but, for whatever reason, that enthusiasm does not extend to sustainable funds,” said Dewi John, head of research, UK and Ireland for LSEG Lipper.
He added, “We have previously speculated that the paucity of bond ESG flows was down to the fact that passive funds are taking all of the fixed income pie, and sustainable funds suffer from being mainly actively managed vehicles. Mainly, but not exclusively.”
Aside from bonds, all other sustainable asset classes were in positive territory. Excluding money market vehicles, sustainable funds collected £10 billion for the first six months of the year while conventional funds saw outflows of £6.4 billion.
Inflows were particularly strong for sustainable equity funds at £10.3 billion, while its traditional equity funds cohort lost £20.3 billion.
The three top-selling sustainable classifications for H123 were the same as in Q123: equity global at £4.57 billion, equity US, £2.68 billion and equity emerging markets global, £899 million. Mainstream equity US funds saw redemptions of £5.85 billion over the period.
As for performance, the second quarter was better for these three popular investments but results were still patchy. Sustainable equity global funds were ahead by 140 bp ahead but sustainable emerging markets funds were squeezed by 18bps.
In terms of fund managers, BlackRock was once again in front on the top ten chart, with £6.64 billion of sustainable flows for H123, mainly directed to equity funds.
That was only slightly less than the combined £6.72 billion of the nine other fund managers on the chart – HSBC, Schroders, abrdn, Legal & General, Vanguard, UBS, J O Hambro Capital Management, Aviva and Ninety-One.
©Markets Media Europe 2023
