UK investors have pulled an eye-watering £26.7 billion out of funds over the past year, Morningstar data reveals.
Uncertainty over Brexit, trade wars between the US and China, and liquidity concerns have battered investor confidence in recent months. Dogged by negative sentiment, investors pulled £965 million out of funds in June alone.
Morningstar analyst Bhavik Parekh says: “Since the beginning of the year, net outflows have been slowing but have yet to turn into net inflows.” Indicating investors’ keenness for lower risk options, however, fixed income and money market funds saw positive inflows of £178 million and £641 million in the month. Money Market funds have experienced outflows in just 12 of the past 60 months.
The pattern of inflows and outflows year to date have stood in stark contrast to those seen in 2018, as the chart below shows. While investors poured more than £8 billion into funds in January 2018, they withdrew almost £6 billion in the first month of this year. Equities have borne the brunt of the outflows in 2019, with outflows of £8.6 billion over the past 12 months. “We haven’t seen monthly net inflows yet in 2019, but flows are gradually moving towards positive territory,” says Parekh, “Nonetheless, the direction of flows for the rest of 2019 is far from certain as political instability is expected to persist, with Brexit and its complications the main driver of that.”
The Silver-rated iShares UK Equity Index fund was among investors' favourites in June, as they looked for exposure to the thriving FTSE 100. The UK stock market has soared as sterling has weakened against the dollar and euro.
Standard Life’s Global Absolute Return Strategies fund continued to bleed assets, losing £292 million in the month. The fund, which has a Neutral rating from Morningstar analysts, has seen its assets under fall from a peak of £26 billion to £8 billion after a poor run of performance and a number of personnel changes within the team. Morningstar analyst Francesco Paganelli says changes have created “uncertainty in both the team structure and its ability to efficiently execute the process over the long term”.
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nflows into Allianz, TwentyFour and Baillie Gifford funds in the month helped the Global Flexible Bond Morningstar fund category attract £250 million. Meanwhile, Equity Income funds were among the least popular with investors as the Woodford Income Focus fund lost a third of its assets in a month and Invesco suffered outflows of £701 million across its offerings including Invesco Global Targeted Returns and Invesco High Income, which saw almost £400 million of outflows between them. The two funds are rated Neutral and Bronze respectively.
Invesco has suffered some of the largest outflows from its range over a 12 month period too, losing £6.35 billion in outflows. M&G funds have bled almost £11.5 billion over that period, according to Morningstar Direct data, although outflows appear to be slowing and were down to £147 million in June.
Royal London has enjoyed the greatest inflows over the past year at £5.6 billion while Aviva funds have attracted £4.7 billion, although Parekh points out that this figure is skewed by an internal rebalancing which has taken place over the past couple of months.
According to figures from trade body the Investment Association, UK investors now have an incredible £1.2 trillion in funds, including £200 billion in trackers (not including ETFs) and £18.4 billion in ethical options.
Its most recent figures, from May, also highlight the uptick in popularity among Money Market funds, which have seen positive inflows for the past three months.
