Investors seek safe haven in Fixed Interest and Cash
Investment into UK Fixed Interest and Cash funds spiked in the second quarter of 2012 as investors sought refuge from the market volatility caused by the Euro crisis, according to Skandia's latest Investment Trends report.
Sales into UK Fixed Interest funds via the Skandia Investment Solutions platform increased by 7% since the last quarter and 18% from the second quarter of 2011, ensuring that it retained its place as the most popular sector. The sector now accounts for nearly a quarter of all sales via the Skandia platform. Cash funds also shot up in popularity, seeing a 28% increase in sales from the previous quarter and a remarkable increase of over 100% from this time last year.
With all the uncertainty and fear surrounding Europe, investments into European Equity funds dropped by 14% this quarter compared to the last. Sales into UK Equity funds also took a hit this quarter as a result of the fallout from Europe, with investments dropping by 12%, relegating it to the third most popular sector behind the Managed sector.
Other sectors to experience significant decreases in sales were Emerging Markets and the Far East which lost out by 16% and 11% respectively since last quarter.
Graham Bentley, Skandia's investment expert, said: "As the European Sovereign debt-crisis continues to unfold along with the market uncertainty it creates, investors are evidently still nervous about where to invest their money. Fixed Income and Cash funds offer safe havens during times of uncertainty and investors are clearly recognising this as our sales data demonstrates.
"Whilst it's a natural reaction for investors to move away from the sectors that have been hit hardest by the volatility created by the Euro debt crisis, it is important to maintain a balanced portfolio to ensure that their investment continues to match their attitude to risk and return over the longer term. One way to control volatility and maintain a balanced portfolio that is in line with an investor's attitude to risk is through the use risk-targeted funds. These funds have an optimised asset allocation so as to achieve the highest expected level of returns within a certain level of risk."