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Equity boost following EU deal to be short-lived

Brexit_clockA slight easing of Brexit uncertainty affected UK fund flows throughout October with fixed income funds seeing their first redemptions since January as investors headed towards equities.

The pattern followed the UK’s announcement of a deal with the EU by prime minister Boris Johnson, noted Calastone, a fund transaction network that published the data.

Up until October 17, bonds had enjoyed modest inflows as investors sought safe-haven investments. But following news of the deal agreement, flows reversed as investors dumped £162 million (€188.2 million) from fixed income funds on the following day alone, and £164 million for the month.

Optimism prompted by the agreement boosted equities, which had £97 million of inflows – their first inflows since June.

However, Edward Glyn, head of global markets at Calastone, said: “Despite a slight improvement in October, it’s too soon to call a turning point in investor appetite to commit capital to riskier assets. Uncertainties abound and that is likely to weigh on sentiment in the months ahead.”

He added that by the end of the October investors had already begun to buy bond funds again, and that the overall improvement for equity funds in October was also mainly driven by a reduction in selling, rather than a pick-up in buying.

“We don’t think it’s likely that equity funds will avoid outflows for the full year 2019,” Glyn said.

Between July and September, investors pulled out a total of £3.5 billion from active equity funds – more than the previous three quarters combined.

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