Sustainable investments attracted a large volume of assets at the start of the year, with net £1.3bn invested, over half of which went into a low carbon equity tracker managed by BlackRock according to the Morningstar Direct Fund Flows Commentary for January.
The BlackRock ACS World Low Carbon Equity tracker clocked up the highest net inflows in January, Morningstar data showed, with more than net £700m added to the fund during the month.
Morningstar said it considered the fund to be at the "light end of the sustainability scale", but its popularity demonstrates the "building investor interest" in the ESG space.
The fund has a good long-term track record, but its deep-value style has meant some investors have lost confidence"
BlackRock saw the highest fund group net inflows in January, helped by the low carbon tracker, with the iShares UK Equity index and iShares North American Equity index also attracting more than £400m combined.
The second-highest fund group net inflows went to Royal London, with approximately 60% going into money market funds, although the Royal London International Government Bond and Royal London UK Equity Income funds also saw net inflows.
Net flows into Royal London's "sustainable" or "ethical" funds totalled £200m in January.
Morningstar fund flow data showed that Invesco's net outflows continued in January, with Invesco Global Targeted Returns and Invesco High Income seeing the highest net outflows, while Invesco European Equity was hit with net outflows of £90m.
"The fund has a good long-term track record, but its deep-value style, which has acted as a strong headwind in recent years, has meant some investors have lost confidence," said Bhavik Parekh, associate analyst, manager research at Morningstar.
Net inflows into UK-domiciled funds reached £812m in January - the third consecutive month of net asset growth.
Alternatives was the only asset class that saw a net outflow in the month, the data showed.
Morningstar attributed the net outflow of £250m from the Asia-Pacific ex-Japan equity category, which the highest since July 2018, to the cornonavrius which it said had impacted investor sentiment.
The UK equity income category saw a net outflow of £766million, with the majority of that due to a £580m segregated mandate carve-out of JOHCM UK Equity Income.
Parekh said: "Even excluding this shift of assets into a separate vehicle, the category would have still finished with the fifth-highest net outflows in January.
"Total net redemptions from Mark Barnett's trio of Neutral-rated Invesco UK equity income funds stood at £200m in January, but this was lower than in recent months."
A version of this article was first published by InvestmentWeek
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