UK Equity Income was the best selling open-ended fund sector for the second month in a row with net retail sales of £1bn, albeit not as high as last month's record figures of £1.4bn, reports the Investment Management Association (IMA). Overall net retail sales totalled £1.9bn and equity continued to be the best-selling asset class by far in July with net retail sales just over £1bn.
Last month's record figure is believed to have been driven by the launch of star manager Neil Woodford's new fund, CF Woodford Equity Income (GB00BLRZQ406). Read more on this
"Last month we saw the Woodford effect propel UK Equity Income to the top of the sales charts," said Laith Khalaf, senior analyst at broker Hargreaves Lansdown. "We suspect this month we are seeing a ripple of that effect, as coupon-clipping investors in Invesco Perpetual High Income (GB0033054015) (a fund Neil Woodford used to manage) stayed for the ex-dividend date on 1 July, then switched across to Woodford's new fund. It is notable that the worst selling sector in July was UK All Companies, the sector in which Invesco Perpetual High Income Fund now sits."
In July UK All Companies was the worst-selling IMA sector for the second consecutive month with a net retail outflow of £230m.
Five best selling IMA sectors in July 2014
| Sector | Net retail sales (£) |
| UK Equity Income | 1bn |
| Property | 304m |
| Sterling Strategic Bond | 274m |
| Mixed Investment 20-60% Shares | 238m |
| Asia Pacific Excluding Japan | 198m |
Source: IMA
It comes as asset manager Henderson reports that in the second quarter of this year dividend payments globally grew by 11.7 per cent year on year to a record $426.8bn, according to the figures from its Global Dividend Index. This has been driven by developed markets with Europe and Japan enjoying the best growth - each up by almost a fifth.
"2014 looks set to deliver the fastest growth in global dividends since 2011, only this time, most of that growth will come from increases in pay-outs from firms themselves, rather than from swings in currencies," said Alex Crooke, head of global equity income at Henderson Global Investors.
But in the UK dividends rose 9.7 per cent over the second quarter to $33.7bn, with the rising pound responsible for most of the gains in US dollar terms - 6.9 per cent. Henderson said UK firms are seeing slow growth in local currency terms.
"Our investigation into how currency moves contribute to investor returns highlights the value of taking a global approach," added Mr Crooke. "Over time, such investors can broadly afford to ignore currency risk as currencies rise and fall against one another through the economic cycle. Investors who take a decision to invest internationally, but only focus narrowly on one region will find themselves much more exposed."
Also see our fund manager interview on the need to diversify your income sources
