The summer of 2022 ended on a sour note for a lot of UK funds. Investors appear to have lost trust in equities, and August marks a fourth month of flows out of equity strategies.
Last month, net outflows from UK-domiciled open-end funds reached £5.2 billion, Morningstar’s data reveals. This is the highest monthly figure in over 10 years – and it brings total redemptions from equity funds over the past four months to about £15 billion. It was also twice as much as July’s net outflows.
Overall, investors withdrew £3.5 billion from UK funds as the outflows from the equity category were offset slightly by the popularity of fixed income. That said, investors also withdrew a net £111 million from property funds.
According to Morningstar analysts Jack Fletcher-Price and Jonathan Miller, the size of net outflows was the biggest since Morningstar started collecting the data in the UK.
“It shows high nervousness from investors, but it's hard to time a market bottom, so we would stress it's key to think long term and stay the course,” they say.
The Europe ex-UK equity Morningstar category alone accounted for more than £1 billion in net outflows in August. In this category, Bronze-rated BlackRock European Dynamic had redemptions worth £419 million alone.
Global large-cap growth equity was the second biggest category for withdrawals, at £849 million. Here, it was Terry Smith’s popular Fundsmith Equity that suffered the most – outflows totalled £450 million. In fact, the fund had one of the biggest withdrawals of all funds in August, only second to Blackrock ACS World ex-UK Equity Tracker at £457 million.
Even sustainable funds struggled this past month. Strategies with a sustainable focus had their first month of net outflows since March 2020, at £199 million. Still, they have attracted £27 billion over the past year. BlackRock’s two funds ACS Climate Transition World Equity and ACS World ESG Insights Equity remain the two most popular active funds over the trailing one year, attracting £4.1 billion and £2.5 billion respectively.
Allocation funds remained in inflow territory as well last month, with £154 million. That said, strategies managed by Ruffer accounted for £207 million of inflows in the category.
As mentioned, inflows into fixed income partly softened the blow from equity investors: the category attracted £1.9 billion. Fletcher-Price notes that the five largest net inflows were all into fixed-income categories, from gilts to corporate bonds. The most popular category, global flexible bond, GBP hedged, attracted a net £444 million.
Allianz had the bond fund with the biggest inflows: investors put £250 million into Allianz Strategic Bond, making it the most popular fund of the month. Two other bond vehicles made the list: Abrdn Global Corporate Bond Tracker and Silver-rated iShares UK Gilts All Stocks Index with inflows of £185 million and £179 million respectively.
One more trend was apparent in August – jittery investors are withdrawing significantly more from active funds. Of the £3.5 billion withdrawn over the month, only £56 million was withdrawn from passives. £3.429 billion came from active vehicles alone.
Fundsmith Equity was the active fund with the largest outflows in August, and has the second-largest outflow over the past 12 months as well: £1.4 billion. Baillie Gifford Diversified Growth, however, is the fund with the largest redemption over the past year (£1.6 billion).
In July, BlackRock experienced its largest redemption since 2018, and while this softened in August, investors still withdrew £434 million. Only Baillie Gifford had a larger outflow, at £537 million. That said, of the 10 largest fund groups in the UK, only three had inflows: Fidelity (£181 million), Legal & General (£62 million) and recently-demoted-from-the-FTSE-100 Abrdn (£63 million).
