Invesco, Standard Life Aberdeen, M&G and Schroders have topped a ranking of the worst-selling fund houses in Europe in 2019 as high-profile scandals in the sector intensified investor aversion to traditional stockpickers.
Active fund managers with large British arms dominated the list, taking up nine of the top 10 spots, according to figures from Morningstar, the data provider.
The active investment industry, where fund managers select stocks rather than track an index, has been under severe pressure because of disappointing performance, high fees and the rising popularity of passive funds.
The heavy redemptions from many of London’s best-known active managers follows the collapse of Neil Woodford’s investment business, the levying of large fines by the financial regulator and the suspension of a popular property fund.
“Negative publicity, such as that generated by the Woodford affair, has hit the active industry at a very bad time, and further discouraged buyers,” said Edward Glyn from Calastone, the fund transaction network.
“It has been a terrible year for active managers,” said Morningstar’s Ali Masarwah.
Investors pulled €15.8bn from Standard Life Aberdeen, the UK’s largest-fund house measured by assets, while Schroders, the country’s largest by market value, bled €6.3bn, its worst outflows from its Europe-based mutual funds in more than a decade.
Other groups hit by fleeing investors included Invesco, whose Henley-based operations propelled Mr Woodford to fame, M&G, which recently listed on the London Stock Exchange, BNY Mellon and Franklin Templeton, US managers with significant operations in London.
Boutique houses did not escape the pain, with Merian, the £22bn manager co-founded by City veteran Richard Buxton, and £28bn house Artemis hit by large redemptions.
The exodus from active is a further burden for British fund managers, which are already grappling with lower profit margins and relentless pressure on fees while preparing for the UK’s exit from the EU.
Mr Masarwah said that the situation for active managers across the UK and Europe would have been much worse had it not been for last year’s stock market rally, which helped drive up performance across their funds.
“They were saved by the markets,” he said. “It is rather ugly for active managers.”
According to Morningstar, index trackers based in the UK attracted £19bn in net inflows last year, while active funds had outflows of £32bn, their highest level on record.
At the end of 2019, passive funds made up eight out of the 10 largest funds in the UK, compared to just three a year earlier. Funds run by BlackRock and Vanguard tracking the FTSE UK All Share displaced former blockbuster active funds such as SLA’s Gars, M&G Optimal Income, BNY Mellon Real Return and Invesco High Income, which is run by beleaguered manager Mark Barnett.
SLA said active managers had been hit by the rise of passive, but added: “With markets likely to become more volatile over the next few years there is the opportunity for active managers to prove their worth.”
Schroders, M&G and Janus Henderson declined to comment. Invesco said that during the third quarter, clients had reacted to market news, such as the protracted negotiations over Brexit and the US-China trade war, leading to outflows in its UK retail business.
Artemis said the outflows were linked to weaker performance across a number of its funds and because of concerns about Brexit. Merian and BNY Mellon attributed their redemptions to the challenging conditions for absolute return funds in 2019.
Franklin Templeton, which has suffered years of investor redemptions, said its sales numbers were improving for several areas globally.
The best-selling list in Europe was dominated by large US players. BlackRock topped the ranking, taking in €64bn, followed by Pimco (€44.5bn) and Vanguard (€22.5bn). The figures include open-ended funds and exchange traded funds domiciled in Europe.