Purchases of investment companies on adviser platforms reached £368m in the first quarter of 2021, setting a new quarterly record, according to data compiled by Matrix Financial Clarity.
This was a 22% increase on Q4 2020, in which purchases were £301m – the previous record. It also represents a 35% uplift on Q1 2020 (£273m).
The number of firms buying investment companies between January and March this year was 1,882, the highest number since the spike in Q3 2016 following the EU referendum and the suspension of several open-ended property funds. The 1,882 firms purchasing investment companies included 1,730 financial advice firms and 51 wealth managers.
Net demand for investment companies on adviser platforms (purchases minus sales) in Q1 2021 was £92m, the highest since Q4 2018.
Nick Britton, Head of Intermediary Communications at the Association of Investment Companies (AIC), said: “Demand for investment companies via adviser platforms began to recover towards the end of last year, and the latest available data shows that this trend continued into the first quarter of 2021, setting a new record.
“Meanwhile, the number of firms using investment companies is the highest it’s been since 2016, and if you exclude the spike in the third quarter of that year when several open-ended property funds were suspended, it’s the highest ever. The most popular sectors include a mix of equity and alternatives such as property and infrastructure, demonstrating that advisers are seeing a broad range of benefits in the investment company structure.”
The most popular sectors for adviser platform purchases in Q1 2021 were Global (18% of purchases), UK Equity Income (7%), Global Smaller Companies (6%), Infrastructure (6%), Flexible Investment (5%) and Property – UK Commercial (5%).
However, looking at net demand (purchases minus sales) paints a different picture. In Q1 2021, the most popular sector by this measure was Commodities and Natural Resources, as concerns about inflation prompted advisers and wealth managers to increase their clients’ exposure. The second most favoured sector by net demand was Global Smaller Companies, followed by Infrastructure, Global Equity Income and Asia Pacific.
The UK Equity Income sector returned to positive net demand (more purchases than sales) in the first quarter of 2021, following three consecutive quarters of net selling on adviser platforms. In 2020, 91% of UK Equity Income investment companies either increased or maintained their dividends, compared to just 4% of open-ended funds in the equivalent IA sector.
Most used platforms
Transact remains the most used adviser platform for investment company purchases, with an estimated 43% share of purchases. FundsNetwork handled 14% of purchases, Ascentric 11% and 7IM 9%.