· Investors dumped £1.65bn from funds in December
· Property funds saw biggest outflows since August 2017
· Equity funds saw £875m of outflows, with all major equity markets seeing redemptions
Laura Suter, personal finance analyst at investment platform AJ Bell, comments on the latest figures from the Investment Association:
“Asset managers were faced with a sea of red in December as investors pulled back sharply from investment markets, withdrawing a total of £1.65bn from funds in the month. Equity funds saw their highest outflows in more than two years, as investors pulled £875m. Every major equity market saw outflows, with investors withdrawing £445m from European-focused funds, £259m from North American funds and £110m from Emerging Market funds.
“Fixed income funds weren’t immune from the outflows either, with a net of £619m pulled from the sector in December, with UK corporate bond and high yield funds accounting for £505m of the outflows alone.
“Property funds saw their biggest single month of outflows since August 2017, with investors taking £228m out of direct UK property funds in December. The memories of the property fund shutdowns amid mass outflows just after the Brexit referendum are still fresh in investors’ minds, and the outflows have already sparked worries about just how liquid some property funds are. It has prompted concern from the regulator, who has reportedly asked for daily liquidity updates from fund managers.
“The FCA has already proposed changes to how property funds, and other illiquid assets, are managed, which could lead the funds to suspend earlier and more frequently than they did in the past. However, we are still a way off the outflows seen after the Brexit vote, when £2.3bn was pulled from the funds over three months.
“Absolute Return funds saw their six consecutive month of outflows, with investors withdrawing a total of £2.7bn from the so-called ‘safe haven’ funds over that period. This is in stark contrast to the £9.3bn of investor money that poured into the funds in the previous 2.5 years. It’s likely a combination of the recent underperformance of some of the behemoths in the sector, as well as the general pull back from investment markets.
“UK equity income funds were a rare bright spot, attracting £65m of inflows, as income-seekers hunted out yield, however, this couldn’t stem the outflows from UK funds, as investors pulled £54m from UK-focused funds overall. Multi-asset funds were another area to see inflows, attracting £561m of new money in the month.”