Political uncertainty prompts exodus from UK equity funds

Laura Suter
5 September 2019

•        UK equity funds see biggest outflows since May 2018
•        £13bn has been pulled from UK equity funds since Brexit vote
•        UK Property funds chalk up 10th consecutive month of outflows

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

“UK equity funds saw their biggest outflows since May last year, as worries about a changing government, the rising prospect of No Deal Brexit and a falling pound all spooked investors. UK All Companies funds bore the brunt, with £734m pulled from the funds in July, taking the outflows over the past 12 months to £2.6bn.

“We’re now at the point where investors have pulled more than £13bn out of UK funds since the referendum vote, with the UK remaining one of the most unloved regions for professional fund managers too. The inflows we saw during May now appear to be a blip, rather than a turning tide in investor sentiment.

“The only equity sector to see significant inflows was global funds, with £424m pouring in. This is unsurprising as Brexit paralysis hits the UK and fears abroad of trade wars, changing interest rate policy and increasing tensions in Asia mean investors are spreading their risk across different markets rather than picking one. 

“Once again investors sought the perceived safety of the bond markets, seemingly turning a blind eye to the colossal levels of debt globally that are now paying a negative interest rate. Bonds funds saw £2.2bn of inflows, with UK Strategic Bond funds snapping up the lion’s share, with £1.2bn of inflows.

“Fears about Brexit’s impact on the property market and sluggish price growth mean UK Property funds chalked up their 10th consecutive month of outflows, with £1bn pulled from the investments during that time. Concerns about liquidity in property funds have already been raised and it’s likely fund managers will be shoring up more cash for future outflows.”
 

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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