IMA figures prove bold institutional buyers beat retail counterparts to short-term gains
Based on IMA sales figures, institutional buyers have been more adventurous than retail investors in recent years, with the latter tending to stick to the more traditional UK All Companies, Equity Income and Corporate Bond sectors.
To judge whether institutional or retail fund buyers have been the shrewder investors over recent years, this month's Investment Strategies survey has taken sales figures for the first four months of the year going back to 1998 to ascertain the most popular sectors of the market in terms of net sales.
It then looks at subsequent returns from the most popular sectors, to see whether retail or institutional investors have proved the better investors, at least in the short term.
At first glance, the most obvious trend to come out of the retail sales figures is the enduring popularity of the UK All Companies sector (formerly UK Growth), top seller in 15 out of the 20 months under investigation, showing the traditional home investor bias.
Looking at institutional sales patterns, there has certainly been more in the way of investment adventure, although this is obviously not necessarily better for returns.
Back in the early months of 1998, for example, when retail investors were sticking firmly to the UK and bond markets, Europe was the top selling institutional sector.
Coming after a strong period for the sector, Europe was top performer from 1 April 1997 to 30 March 1998, returning 29.85% offer-to-bid.
This shows signs of buying at the top, however, with the European sector in freefall ever since.
Showing a greater appreciation of investment trends than might be expected of institutional investors, Far East ex-Japan was top seller in January and February 2001.
Far Eastern markets are typically expected to outperform as the earliest beneficiary of a global economic upturn, and the sector was the second best performer behind global emerging markets, returning 8.22% offer-to-bid over 12 months to 1 April 2002.
While the sector has since fallen off somewhat, as has the expected global recovery, it was institutional investors that reaped the benefits of its short-term performance rather than retail investors, with the sector never getting higher than 12th best seller from January to April 2001.
For more details, see the February Investment Strategies.
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