Fixed income was thoroughly in favour over the summer — the only asset class to have two consecutive months of inflows.

Data from Morningstar shows that retail investors pumped £698 million into fixed income funds in July, pushing the total invested into the sector this year to £2.85 billion. In June, £838 million was invested in the sector.

Bonds have become popular with investors this year. Prices crashed at the end of last year, pushing up yields and offering investors palatable returns after a decade of low bond yields.

As yields moved skyward, investors could get good returns without taking the level of risk associated with the stock market.

In a further breakdown of the data, Morningstar said that the most popular type of bond fund was global corporate bonds, with £546 million invested in these funds in July. The next favourite was UK government bond funds at £279 million.

“The current yields and future capital growth potential is as good a mixture as we’ve seen in well over a decade,” said Tim Morris, from Russell and Co Financial Advisers.

“I’ve heard a lot of fund managers enthuse about the current opportunity in bonds — from unusual short-term trading to those who see reducing inflation and low growth as an ideal environment for bonds to flourish.

“In my opinion, bonds are back. In fact, if I wanted to be controversial, I’d say a 60-40 portfolio could be a good way to go, especially as very few clients have the risk profile and capacity for loss of a portfolio predominantly made up of equities.”

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