Investors dump equity funds at record rates

The third quarter of 2019 saw the largest net retail outflows on record at £4.6 billion.

Funds and Investment Trusts November 7, 2019 by Tom Bailey

Investor money out of equity funds hit a record level in September, according to the latest data from the Investment Association.

The trade body’s latest statistics showed that equity funds saw outflows (investor withdrawals) totalling £1.7 billion in September, marking the fourth consecutive month of outflows.

September’s figures mean the third quarter of 2019 saw the largest net retail outflows on record at £4.6 billion.

The largest amount of money withdrawn was in UK equity funds. In total, UK equity funds experienced net retail outflows of £676 million in September. The third quarter ended with record outflows totalling £2.3 billion.

Considering the Brexit-related political turmoil in September, these large outflows are not surprising. As Laura Suter, a personal finance analyst at AJ Bell, notes: “September was a month where everyone learnt the word proroguing and saw yet more heated Brexit wrangling, unsurprisingly this did little to encourage investors to put their backing behind the UK, and we saw £676 million of outflows from UK equity funds in the month.

“The tally of outflows since the Brexit vote keeps ratcheting up, and is now within touching distance of £15 billion – leaving quite a hole in UK fund managers’ portfolios.”

However, the UK was not the only region to see equity fund outflows, with increased bearishness resulting in negative outflows around the world. As Chris Cummings, chief executive of the Investment Association, notes: “Global uncertainty cast a long shadow over stocks and shares in the last quarter.”

European-focused funds experienced the second net retail outflows of any region, at £290 million. Meanwhile, Japan funds saw net retail outflows of £254 million, while Asia funds saw net retail outflows of £154 million in September.

Global funds experienced net retail outflows of £226 million. North America’s £75 million in net outflows was the smallest outflow of all regions.

Emerging markets, however, proved to be the only regional bright spot for equities, with the global emerging markets fund sector experiencing net sales of £270 million.

Fitting with the idea of investors becoming more concerned about global risks, the mixed asset sector was the best-selling asset class in September, with £845 million in net retail sales. Meanwhile, fixed income was the second best-selling asset class with £794 million of inflows.

According to Cummings: “Bond funds benefited as investors looked for a port in the storm, with mixed asset funds also providing relief. Bond and mixed asset funds each experienced inflows of £2.2 billion in the last quarter, as investors continued to diversify their portfolios.”

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