Investors pulled almost £9bn from UK-based funds in March as they fled every single asset class amid the market havoc caused by the coronavirus crisis, latest data has shown.
Figures from Morningstar, published today (April 20), showed UK funds saw their largest ever monthly net outflow in March 2020, with £8.7bn withdrawn during “one of the quickest swings into a bear market” in history.
Fixed-income funds led the outflows, with a net £5.5bn withdrawn as bond prices tumbled when the central bank’s interest rate cuts and increased spending were not enough to abate market concerns.
Equity funds saw a relatively small outflow of £769m despite equity markets falling dramatically due to the crisis.
Markets hit their lowest point of the crisis so far towards the end of March, with the S&P 500 falling 27 per cent from the start of March to March 23 and the UK's blue chip index losing 25 per cent in the same time period. Both indices have rallied slightly since that point, up 28 and 15 per cent respectively as at today.
But within the equity asset class investors fled active management to the tune of £3.9bn and instead piled £3.15bn into passive equity mandates.
| Asset class | Net flows (£1m) in March 2020 | ||
| Passive | Active | Total | |
| Allocation | -1 | -664 | -665 |
| Alternative | - | -1,701 | -1,701 |
| Equity | 3,149 | -3,919 | -769 |
| Fixed Income | -2,199 | -3,289 | -5,488 |
| Property | - | -84 | -84 |
| Other | - | -6 | -6 |
| Total | 949 | -9,662 | -8,713 |
The shift from active to passive funds has been a growing trend since Mifid II regulation came into effect in 2018, but March’s swing was “even more pronounced” than other months, according to Morningstar.
This substantial shift meant Vanguard — known for its passive funds — had its best ever month in terms of net inflows, with £1.2bn piled into the fund house. Blackrock, which is also passive-heavy, saw £80m of net inflows.
Fund groups whose fund offerings are primarily active saw high net outflows in March. M&G, Invesco, Baillie Gifford, Schroders, Jupiter and Janus Henderson all had net outflows of more than half a billion.
In terms of funds, Vanguard’s FTSE UK All Share Index fund saw the most inflows with £704 invested, followed by iShares UK Equity Index fund and BlakcRock’s Cash fund with £572m and £417m of inflows respectively.
Investors fled the iShares UK Gilts All Stocks Index to the tune of £725m while previously popular Fundsmith Equity saw £461m pulled from the mandate.
Alternative funds continued to be out of favour and saw a further £1.7bn of net outflows in March while property funds only lost £84m as the vast majority of mandates were gated when their assets were unable to be valued due to the market turmoil.
According to Morningstar, the widespread belief that UK equities were undervalued going into the crisis meant the further 30 per cent drop in UK markets encouraged many investors to turn to UK large-cap equity funds.
Active vehicles within this sector saw a small overall net inflow while £2.1bn was invested in passives in the UK large-cap space.
imogen.tew@ft.com
What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.
