The third quarter of the year, home to the long summer holiday, tends to be quiet. But this year it was anything but. It started with a Middle East flare-up and closed with a UK bond problem. The US-Iran ceasefire collapsed on 8 July, Brent was back above US$100 by late July and global inflation was boiling over.
Andy Burnham became the UK’s prime minister on 20 July, replaced Rachel Reeves with John Healey and indicated he would seek fiscal flexibility, pushing the 30-year gilt yield to around 5.75% on day one. By September the alarm was baked in, with the 10-year gilt yield up from 5.06% to 5.42% and three Bank of England members voting for a rate rise.
The Budget on 28 October will show whether the gilt market’s patience holds, and we suspect that patience is thinner than Downing Street hopes.
Despite those successive shocks, stocks held their nerve, with the FTSE All-Share rising 1.7% over the quarter. According to Finscape, assets under management across the wealth management landscape were only marginally higher than in the previous quarter at £1.2tr n. However, the nervousness showed in investment flows, with gross flows falling by five percentage points to £96bn and net flows barely positive at £77m.
Looking at on-platform business only, flows were less volatile, with both gross and net holding their patterns. Beneath the bonnet, the advice channel was particularly strong, averaging monthly gross and net flows of £7.5bn and £1.5bn respectively. What also stood out was its emphatic embrace of all things MPS. The MPS trend has been intensifying over the last two years, with gross and net flows accounting for almost the entirely of advised activity.
If you’re an asset manager trying to read these conditions and work out where to focus your efforts, Finscape can help.