Investors flee UK equity funds for bonds

Laura Suter
1 August 2019

·         Bond fund inflows of £2.4bn, take 1-year inflows to £6bn
·         UK equity funds lose £2.7bn over the past year
·         Absolute Return giants hit again

Laura Suter, personal finance analyst at investment platform AJ Bell, comments on the latest Investment Association figures:

“Clearly the ongoing debate in June about who was going to be our next Prime Minister and the increased prospect of No Deal Brexit spooked investors, who once again shunned investing in the UK. The previous month had seen the first influx of money to UK funds in two years, but that has proved a mere blip with outflows in June of £744m. It marks a torrid year for UK equity fund managers, with £2.7bn withdrawn from the fund over the past 12 months.

“The UK has been a real game of two halves thanks to Brexit. Of the FTSE 100, the 50 most domestically-focused companies have handed investors a 13% loss since the start of 2016, while the 50 companies who get more of their earnings from overseas have returned more than 40%. Over the past year the overseas-focused companies have risen slightly, while the domestic stocks have continued to fall around 8%.

“Bond funds were back in favour in June instead, seeing £2.4bn of inflows to the sector, taking the total inflows to almost £6bn so far this year. What’s more, around £1.1bn flowed into UK Strategic Bond funds alone in June, the largest inflows since November 2017.

“Bringing up the rear and keeping its mantle as the most unloved sector, Absolute Return funds saw yet another £500m pulled by investors during the month. Total outflows over the past year are now nearing £6bn, with some of the behemoth funds dwindling in size. Standard Life GARS, for example, has seen almost £10bn withdrawn over the past year, while Merian Global Equity Absolute Return fund has clocked up £4bn of outflows. Many of the funds seeing the largest outflows have failed to deliver above-inflation returns, with investors voting with their feet and heading for the exit.”

Laura Suter
Personal Finance Analyst
Laura Suter is personal finance analyst at AJ Bell. She is a multi-award winning former financial journalist, having specialised in investments. Laura joined AJ Bell from the Daily Telegraph, where she was investment editor. She has previously worked for adviser publications Money Marketing and Money Management, and has worked for an investment publication in New York. She has a degree in Journalism Studies from University of Sheffield.
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