£1bn pulled from UK equity funds in February

£1bn pulled from UK equity funds in February

A total of £1bn was pulled from UK equity funds in February 2021, making this region worst hit for net retail sales, according to the Investment Association.

Investors have shunned UK equity funds but demand for equities generally was still strong, with £969m allocated to global equity funds and Asian equity funds receiving £638m.

Overall, funds attracted inflows of £2.4bn in February, with net retail sales of fixed income funds accounting for over half of this.

This demonstrated a comparably strong start to 2021, following £1.2bn of net retail sales recorded for January 2021.

In comparison to February 2020, net retail sales were merely down by £100m in the month. However, funds under management in total have increased from £1.3trn to £1.4trn in that year. 

Chris Cummings, CEO of the IA, said: “The preference for Asian equities continues as the opening up of Asian economies following the pandemic advances ahead of Europe and the US. 

“Global equities remain a perennial favourite as savers looked to spread their risk through globally diversified funds.

"Closer to home, UK Smaller Companies funds continued to buck the trend of outflows from funds investing in UK shares, receiving £142m in February, and North American Smaller Companies funds also attracted strong inflows of £252m.”

With £1.4bn of net retail sales to bond funds, this set apart fixed income as the most popular asset class. Mixed asset was the second best-selling asset class with £838m of inflows.

Meanwhile, investors withdrew £99m from property funds with money market funds suffering the worst with net retail outflows of £486m in February. 

Minesh Patel, chartered financial planner and director at EA Financial Solutions, said: “I’m not surprised that equity funds have been stronger because there is decent value perceived to be out there. There is still room for growth given QE and many companies are still profitable.

“With UK equity funds specifically, it has been a disappointing asset class since 2016 and in search of growth and income it is not surprising investors are looking elsewhere.

"I do not ignore the UK but [it] is forming a smaller part of our allocation, I have been looking to other regions for equity exposure.”

Jon Yarker is a freelance reporter for FTAdviser