UK equity funds see third-highest monthly net outflows ever
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UK equity funds face third-worst month for outflows on record as investors pull back £868m – missing January’s top month for the FTSE 100
- Calastone: UK equity funds had net outflows of £868m in January
- For every £1 of ‘sell’ orders for these funds there was £0.59 of ‘buy’ orders
- Global equity funds had their second-best January in nearly three decades
UK-focused equity funds suffered their third-worst monthly outflow on record in January, continuing the pain after a disastrous 2022, new figures show.
According to funds network Calastone, there was a net outflow of £868 million into the UK equity funds market last month against a backdrop of heightened economic uncertainty.
Calastone noted that for every £1 of ‘sell’ orders for these funds, there was only £0.59 of ‘buy’ orders, with no trading day witnessing any net purchases. This represented a “mismatch” that no other fund industry has experienced, Calastone said.
The large-scale withdrawals came despite a solid month for the FTSE 100, which added about 4.3 percent after outperforming global peers last year.
Outflow: Investors took £868m more out of UK equity funds than they put in last month, according to Calastone, amid heightened economic uncertainty
Active equity funds and funds without an environmental, social and governance portfolio were particularly affected by outflows.
Real estate funds also suffered significant outflows due to further rate hikes by the Bank of England and weak demand for office space, although these losses were minimized by fund managers restricting redemptions.
By contrast, fixed income funds saw net inflows of £1.23 billion in January, the second-largest monthly bond inflow ever, as investors sought to capitalize on higher-yielding debt.
January marked the 20th consecutive month of net asset losses for UK-focused funds, already reeling from record outflows in 2022, even as the FTSE 100 Index outperformed other major global counterparts.
Only June and November 2022 saw greater outflows into UK equity funds, with £1.06bn in the first month and a further £1bn in the last month.
Edward Glyn, head of global markets at Calastone, said: “UK equities used to be a core interest for global investors, but… they now occupy a dusty and reduced corner of these large portfolios.
Political instability and a sense of unstoppable decline are also driving investors away from the UK. British equities now also seem to have lost their appeal for domestic savers.’
By comparison, global equity funds had their second-best January in nearly three decades, with net inflows of £969 million, almost half of which came from funds without an ESG mandate.
Calastone also said the Chinese government’s easing of zero-Covid policies has increased interest in funds targeting the Asia-Pacific region and emerging markets.
Glyn added: ‘2022 has been a good year to hide in UK equities so there is some rotation going on as UK investors move to global funds which are more likely to benefit from a return to bull market conditions – we have the sale of UK stocks. funds are rising at the same rate as buying global funds.
“However, this confidence may be premature, as while global interest rates are still rising and corporate earnings are coming under pressure, this is not yet fully reflected in global markets.”