IA-listed funds shed £36bn in June

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IA-listed funds shed £36bn in June

Fund investors suffered their worst month in almost four years in June, with the value of portfolios under management collapsing by a massive £36bn.

The amount of money in UK-domiciled funds plummeted from £899bn at the end of May to £863bn a month later, data from the Investment Association shows.

It marks the worst month-on-month fall since August 2011 when the eurozone sovereign debt crisis began to escalate and the US was stripped of its top-notch Standard & Poor’s AAA rating.

The Greek debt crisis and the fall in China’s stockmarket have been blamed for the crash by commentators.

The 12 months to the end of May have witnessed the Shanghai SE Composite index enjoy a meteoric 151 per cent rally – on the back of what has been labelled a state-sanctioned rally – driven by borrowed money.

But in June, regulators stepped in and the market dived by almost 20 per cent, while the Shenzhen Stock Exchange plunged 17 per cent between June 8 and the end of the month, data from FE Analytics reveals.

The decline in funds under management in the IA China/Greater China sector was significant, falling by 10.6 per cent in June, while the Asia Pacific ex Japan sector was similarly affected by the regional volatility and lost 8 per cent.

The latter category was also the worst-selling IA sector in the month, with a net retail outflow of £226m. Only three sectors – Japanese Smaller Companies, Money Market and Property – saw their funds under management rise in June.

UK blue-chip companies bore the brunt of the international turmoil, with the FTSE 100 index plummeting by 6 per cent in the month, while the MSCI AC Europe index mirrored its collapse.

Commenting on the catastrophic month, Chelsea Financial Services managing director Darius McDermott said: “This is quite a significant month-on-month fall.

“The markets have been hit by the twin threats of Greece leaving the eurozone and China’s stockmarket volatility.”

Hargreaves Lansdown senior analyst Laith Khalaf added: “This is quite a steep one-month fall, but it reflects the big-sell off in the markets.

“At the end of May the FTSE 100 was hovering around the 7,000 mark, but a month later it was about 6,500.

“This has been representative of what has been happening around the world.”

In spite of the volatility, retail investors still ploughed £1.5bn into funds during June, with the IA Targeted Absolute Return sector enjoying a big chunk of this after amassing sales of £445m.

While Adrian Lowcock, head of investing at Axa Wealth, agreed that June had been a “very challenging month for investors”, looking forward he believes there are reasons to be positive.

He said: “While the US and UK markets are at the top end, company earnings are tending to come in ahead of expectations, especially in the US, and growth remains positive and stable in these markets.

“Asia and emerging markets could be out of favour for some time, so investors need to take a long-term approach.”