When we reported on asset flows last month, we noted it had been the worst month on record since the mass outflows of March 2020. This time, flows are even higher.
Morningstar data reveals redemptions from UK-domiciled open-end funds increased to £5.3 billion in June. Investor sentiment has soured towards equity strategies in particular, where we've seen £3.9 billion of outflows. Over half of this (£2.6 billion) was from UK equity funds.
Combine May and June and we’ve seen the worst two-month period since December 2018: £8.8 billion versus £10.4 billion.
Earlier this year, fixed-income securities were popular among investors, with strong subscriptions. But with the recent interest-rate increases, funds in this category, as well as allocation strategies holding fixed income, have generally not performed well.
Investors have not withdrawn as much from these funds as from equity strategies, but with only £12 million added, flows are muted compared to the recent past. Moreover, allocation funds have lost half a billion, the second largest outflow if we exclude money market funds.
As always, sustainable funds continued to see inflows, particularly in equity strategies – but the net figure of £489 million was the lowest since April 2022.
In the past month, there’s also been an interesting switch in investor preference for active and passive vehicles. Manager research analysts Bhavik Parekh and Jack Fletcher-Price point out that the phenomenon has reversed, however.
“In recent months, active strategies had enjoyed inflows that were often larger than those of their passive counterparts, in aggregate. However, June was active strategies' worst month since March 2020, with outflows of 4.3 billion,” they say.
On the category side, US large-cap blend equity recorded the highest numbers in June with inflows of £601 million. This was the first positive net flow number for the category, which houses most of the US equity-index funds, since September last year. According to Morningstar’s analysts, this could be a signal that investor sentiment is starting to turn after several gruelling months.
Global large-caps also did well with inflows of £331 million, enough to finish the second quarter with positive net flows overall. Fundsmith Equity, which is the largest constituent of the category, saw an outflow of £279 million in June, while FP Brunel High Alpha Global Equity, the second-largest fund in the category, received the highest monthly inflow of any fund, with £622 million.
As mentioned, UK equities were hardest hit this month, and UK large-cap equity lost £1.9 billion alone. By far the fund with the highest redemptions was Vanguard FTSE UK All Share Index, with £1.1 billion in net withdrawals.
Within the Europe ex-UK equity category, which had redemptions of £851 million, active strategies took the hardest punch.
At an asset manager level, Baillie Gifford and Vanguard are the two fund houses with the highest outflows in June, at £941 million and £891 million, respectively. Before this year, the last time Baillie Gifford witnessed two consecutive quarters of outflows was in 2016. Vanguard has had consistent inflows for the past decade.
Elsewhere, Aviva recorded its largest ever quarterly net outflow (some £3.2 billion), and M&G is yet to record a month of net inflows this year. BlackRock had flat flows in the month of June alone, but recorded negative quarterly flows for the first time since the final quarter of 2018 (for its UK-domiciled open-end funds), following large withdrawals in April and May.
Beyond that, Jupiter saw net inflows of £112 million, its first positive net flow since September 2018. Jupiter Asian Income and Jupiter UK Special Situations contributed a combined £146 million to this figure.
