Market volatility and a corresponding “risk on, risk off” approach in the opening month of 2016 resulted in the worst net retail fund flows since October 2008.
Investment Association (IA) interim chief executive Guy Sears said a risk on, risk off approach from investors had exacerbated market volatility in January, resulting in net retail outflows of £463m from UK-based funds.
This is the worst month since October 2008, when outflows reached £490m, according to IA statistics.
“Risk on, risk off was the theme in financial markets during January, which led to increased volatility,” Mr Sears explained. “Unsurprisingly, this caused some investors to reduce their holdings in investment funds.”
Fixed income funds saw the highest outflows, of £267m, while equity funds suffered a net retail outflow of £58m.
Within fixed income, only the Gilts and Index-linked Gilts sectors saw positive inflows.
Equity outflows were mainly consigned to the UK All Companies, Global and Asia Pacific ex Japan sectors. The trio saw over £500m of net outflows in total.
But this was offset by net inflows into Europe ex UK and North America equity funds of £250m and £228m, respectively.
Mixed asset funds were also hit by outflows, of £157m, though Mr Sears stressed the asset class had not previously endured net outflows in an individual month in more than a year.
Passives again continued to prosper, however, with tracker funds enjoying net retail inflows of £543m.
