UK investors withdrew nearly £2bn from equity funds in August, outpacing post-Brexit vote withdrawals
- The previous discharge records were set in mid-2016 after the Brexit vote
- Infrastructure and renewable energy specific funds saw modest inflows
- UK-focused funds saw the largest net outflow overall, losing £759m overall
UK investors withdrew a record amount from equity funds last month amid mounting economic pressures, new figures show.
London-based Calastone said a net £1.93 billion was withdrawn from equity funds in August, with most of that outflow reflecting selling activity rather than a slowdown in buy orders.
This significantly surpassed previous records set in June and July 2016 of £1.54 billion and £1.56 billion respectively, after the UK voted to leave the European Union.
Outflows: London-based Calastone said it took £1.93 billion net out of equity funds in August, with most of that outflow coming from selling activity
All regions saw net outflows, but UK-focused funds suffered the biggest losses overall, losing a total of £759m and marking the 15th straight month of net outflows.
Meanwhile, North America and Asia-Pacific had record-breaking bad months, with the latter area being hit hard by extremely tough lockdown restrictions in China.
Even emerging market funds, which have benefited from skyrocketing oil prices following the easing of Covid-19 regulations and Russia’s all-out invasion of Ukraine, have seen net outflows.
It means equity funds have lost £4.3 billion so far this year, which is the second-worst eight-month period since Calastone started recording such data in 2014.
“When central bankers tell you in no uncertain terms how determined they are to root out inflation, even if it means triggering a painful recession, it’s worth listening,” said Edward Glyn, Calastone’s head of global markets.
“Markets are absorbing the likelihood that inflation will be extremely damaging and persistent, meaning interest rates will remain higher for longer than originally expected. The combination of a weaker economy and higher interest rates is having a very negative impact on share prices, particularly growth stocks.’
Despite the significant market weakness, Glyn noted that sector funds had generated modest inflows, including infrastructure funds and those with an environmental, social and corporate governance bias.
Renewable energy funds performed very well as rising gas prices encouraged more people to invest in cheaper and greener alternative energy sources.
“These funds are a tiny part of the UK fund market, but they offer some investors a valuable counterweight in these volatile times,” Glyn said.
Bond funds also generated inflows of £820m despite bond markets suffering a major downturn caused by interest rate hikes and rising inflation.
Digital asset manager Collidr announced last month that UK corporate bonds lost nearly £300 billion in value in the first half of the year, down 13.3 percent, compared with a 3 percent decline in the FTSE 100 index.
Collidr’s research also showed that the value of UK government bonds fell by 14.8 percent over the same period – the largest percentage drop since the 1980s.