Investments  

Investors flee UK equities in worst ever quarter

Investors flee UK equities in worst ever quarter

Investors withdrew a net £676m from UK equity funds in September as part of a widespread exodus from equity markets. 

Every single equity market sector in the Investment Association universe had outflows in September, with funds in the IA North America sector suffering least at £75m, while the global sector had outflows of £226m, and the Japan sector of £254m.   

Over the three months to the end of September, a total of £2.3bn was withdrawn from UK equity funds, the worst quarter in history, according to the Investment Association.

Jason Hollands, managing director for communications at wealth manager Tilney, said: “Cast your mind back to September and this news is perhaps not surprising.

"Hopes of a resolution to the US-China trade war were fading, the UK parliament was at loggerheads over Boris Johnson’s 'do or die' pledge to leave the EU with or without a deal by Halloween and nothing had been agreed with the EU.

"Unsurprisingly many investors may have felt the sky was about to fall in."

Much of the cash that has been exiting equities has been finding a home in the Fixed Income and Mixed Investments sectors, with investors ploughing £794m into bonds and £845m into the various mixed investment sectors. 

Mixed investment is a group of three multi-asset sectors, each with a different maximum exposure to equities. 

Of these the Mixed Investment 40-85% Shares received the most inflows at £346.5m, followed by the Mixed Investment 0-35% Shares at £73.4m, and the Mixed Investment 20-60% Shares at £22.4m inflows.  

The data also showed that passive funds accounted for 17 per cent of the total funds market, while passive investments accounted for 1.6 per cent.

Tom Sparke, investment director at GDIM in Cambridge, said: “Caution is rife ahead of Brexit and with global growth waning and trade so uncertain this looks set to continue. 

"I think some asset allocators appreciate the healthy gains that have been made so far this year and are therefore reigning in risk in portfolios to protect capital at this stage. 

"The concentration of outflows from UK stocks reflects domestic uncertainty and this is not surprising, it will be interesting to see if the general election adds to this reticence to take on UK stocks next quarter.”

This morning, the Bank of England stated it expects the UK economy to have grown by 1.25 per cent this year, unchanged on its August forecasts.

But it expects the UK to grow by 1 per cent less over the next three years, compared to what it predicted in August.

The Bank of England’s Monetary Policy Committee voted by a majority of 7-2 to leave the base rate unchanged at 0.75 per cent.

david.thorpe@ft.com