The data, released today (February 7) showed UK equity funds saw net retail outflows of £4.9bn in 2018.
Sales of retail funds also tanked 85 per cent across the Investment Association (IA) sectors, with total net sales of £7.2bn in the 2018 calendar year, compared with £48.5bn in the previous year.
The news comes after the IA set a target of doubling its members’ assets under management within a decade as part of a plan to enhance the UK’s competitiveness and reputation as a financial services hub.
The UK All Companies sector was the least popular with investors, with net outflows of £3.9bn in the year.
But the sector still remained the one with the most capital in it, with £159.8bn, followed by Global with £104.7bn.
The best selling equity market sector was the IA Global, with net inflows of £3.9bn, followed by Mixed Investment 40-85 per cent shares, with net sales of £3.3bn.
The only bond sector to feature among the five largest was the Sterling Corporate Bond.
Chris Cummings, chief executive of the Investment Association, said: "Savers faced a perfect storm of political and economic uncertainty during 2018 leading to a sharp drop in retail fund sales.
"With investor confidence dented, the fund market experienced a dip, ending the year with £1.15trn funds under management.
"UK equities were particularly hard hit, with savers reacting to the ongoing Brexit uncertainty by pulling out £4.9bn in 2018.
"As the clock ticks towards the UK leaving the EU, asset managers and the millions of savers who rely on them are looking for greater certainty.
"It is critical that every effort is now made to find a constructive path forward that protects Europe’s savers and investors from the cliff edge effects that a no-deal Brexit could bring."
The negativity surrounding UK equities also tempted some fund managers to increase their exposure.
Simon Evan-Cook, multi-asset investor at Premier, said the valuations at which the market presently trades meant many UK shares were attractive, which led him to increase exposure to the domestic market via funds.
Job Curtis, who runs the £1.6bn City of London investment trust, said he increased the level of debt taken on in order to buy more UK shares.
But Peter Toogood, chief investment officer at The Adviser Centre, said he believes investors should have more exposure to bonds in the current climate.
He said: "So many people in the market have had the view for years that bonds are expensive, don’t buy bonds, and yet bonds kept going up.
"That is because there is little real economic growth in the world. The FTSE 100 has not gone up much since the start of the century. That is the stock market saying companies are not growing their earnings, and in such a climate, bonds are the place to be."
Data from AJ Bell out yesterday showed investors pulled £875m from equity funds in December, with all of the IA sectors showing outflows.
Laura Suter, personal finance analyst at AJ Bell said: "Every major equity market saw outflows, with investors withdrawing £445m from European-focused funds, £259m from North American funds and £110m from Emerging Market funds.
"Fixed income funds weren’t immune from the outflows either, with a net of £619m pulled from the sector in December, with UK corporate bond and high yield funds accounting for £505m of the outflows alone.
"Property funds saw their biggest single month of outflows since August 2017, with investors taking £228m out of direct UK property funds in December.
"The memories of the property fund shutdowns amid mass outflows just after the Brexit referendum are still fresh in investors’ minds, and the outflows have already sparked worries about just how liquid some property funds are."
david.thorpe@ft.com
