According to AJ Bell, UK retail investors are starting to jog

According to investment platform AJ Bell, UK retail investors have piled into equities and other fixed income products in the past few months in search of higher returns and lower risk.

Michael Summersgill, who took over as chief executive of AJ Bell in October last year, said the platform’s clients had increased their investment in UK sows by a “significant” amount. He added: “I’ve been here 16 years and I’ve never seen gilts and fixed incomes bought in the volume we’ve had.”

Yesterday UK gilt yields hit levels not seen since Liz Truss’s ‘mini’ budget last year after the UK reported consumer price inflation of 8.7 per cent in April, higher than the Bank of England forecast. The yield of two-year-old gilts rose above 4.4 percent again on Thursday.

This trend among retail investors reflects a recent shift by institutional asset managers to fixed income products to provide higher returns amid rising interest rates and stubbornly high inflation.

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Summersgill said gilts maturing in January 2024 were the most popular investment products in the three months to March 31.

“People in that uncertain environment thought, ‘I don’t want this money sitting here and doing nothing. . . but I’m not sure now is the time for a big stock market play,” he said.

Data from rival platform Interactive Investor showed that retail investment grew by 920 percent between April 2022 and March 2023, although it remained a small share of all trades.

“Two-year gilts have risen above 4.5 percent at the end of September 2022, offering a very attractive yield for those who hold the bonds to maturity,” said Interactive Investor bond specialist Sam Benstead.

“Investors have also benefited from the tax rules on bonds, where no capital gains tax is payable if the capital is repaid at maturity.”

AJ Bell’s pre-tax profit rose 61 per cent to £42m in the six months to March 31 on revenue of £104m, boosted by new customers and higher interest income from cash holdings.

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Panmure Gordon analyst Rae Maile said the pre-tax profit beat their estimates due to slightly lower-than-expected costs at AJ Bell and higher interest income from cash. He added: “AJ Bell has invested in its business and its brand and the benefits are increasingly visible.”

It currently has over 450,000 customers investing £69bn in its platform, representing £2bn of annual growth. Inflows into own funds increased by £0.9bn to £3.9bn overall.