UK funds continue to be shunned by investors, who are instead turning to global funds.
Investors have taken some £8 billion out of UK equity funds since the Brexit vote, according to new figures from the Investment Association (IA).
While the FTSE 100 hit a new record high last month, UK-focused funds continue to be out of favour.
Out of the £8 billion investors have taken out of UK stock market funds since Brexit, £1.8 billion went out of UK Equity Income funds, and £5.8 billion left UK All Companies funds.
Laura Suter, personal finance analyst at AJ Bell, says: ‘Investors tentatively moved back into the UK Equity Income sector in April, but UK stock market funds overall still saw outflows of £142m in the period.’
At the same time, she points out that ‘fears of escalating trade wars, ongoing tensions with North Korea and rising interest rates have not deterred investors from the US, or global markets, which together saw more than £1 billion of the equity inflows’.
This illustrates the ongoing outflows from UK funds in parallel with inflows into global funds, as retail investors continue to shun the UK.
Global fund managers too, such as James Thomson from Rathbone Global Opportunities, have been moving their portfolios out of the UK stock market.
Moreover, pessimism towards UK equities hit an all-time high earlier this year, when the Merrill Lynch global fund manager survey revealed that 42 per cent of fund managers are underweight the region.
Today, a leaked tape revealed that foreign secretary Boris Johnson warned Conservative donors of a Brexit ‘meltdown’. Meanwhile, a group of 40 MPs is backing a second referendum on Brexit. Such ongoing political uncertainty surrounding the UK’s exit from the EU coupled with economic weakness is likely to see more investors running for the door.
However, it’s worth noting that UK funds, particularly those that focus on smaller companies, have put on a strong showing over the past year.
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