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Political uncertainties damage fund sales to UK investors

UK equitiesUK retail savers have continued to withdraw funds from UK regulated fund products for the fifth consecutive month amid concerns over economic and political uncertainty in Europe.

European and UK equity funds bore the brunt of this investor negativity, with these sectors experiencing net retail outflows of £453 million (€529 million) and £236 million respectively during February.

In aggregate terms, retail investors pulled £156 million out of UK authorised funds over the month, according to the latest data published by the Investment Association, the UK asset management trade body.

With the investment outlook in Europe soured by Brexit concerns, UK savers looked to global equities to generate return opportunities, pushing net inflows of £513 million into this asset class.

Investors were also attracted to global bond funds, committing £345 million in net retail sales, as well as mixed asset funds, Asia-Pacific equities (ex Japan) and global emerging markets.

Passive funds did well, with tracker products attracting £476 million in net retail investment during February.

In contrast, retail investors shifted money out of property and money market funds, redeeming £45 million and £62 million respectively from these asset classes over the month.

It was not only UK retail savers that chose to take flight from UK authorised fund products. On top of the £156 million in retail redemptions, UK-based institutional investors withdrew £892 million over the month. This represents a sizeable reverse from the £1 billion in net retail subscriptions and £2.3 billion in net institutional subscriptions that the UK industry collected in February 2018.

Investors’ reluctance to commit to equity products has continued into March, according to the latest Fund Flow Index (FFI) generated by Calastone, the London-based fund transaction network.

During this month, investors added just £74 million to their equity holdings, the ninth-weakest net sales figures since the FFI was created at the start of 2015. European equity funds have now experienced 11 consecutive months of net redemptions.

For the year-to-date, investors have installed just £120 million into equity fund holdings, equivalent to the net daily equities sales that it attracted on a single typical trading day during December 2017.

Real assets have suffered across the board, with property having had its worst quarter since the FFI was created.

However, there are signs of a brighter outlook for UK equities, which have seen a cautious acceleration in investor interest driven by pricing levels which now appear attractive when set against historical and overseas comparisons.

Mixed asset funds, which are subject to lower flow volatility because they represent a central component of regular retail savings plans, have also continued to attract money, generating net sales of £546 million during March.

The Calastone FFI measures net investment flows from UK-based independent financial advisers, fund platforms and institutions investors into UK-domiciled asset managers and into funds domiciled offshore, particularly in Ireland and Luxembourg.

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