UK-focused equity funds saw record outflows of £836mn in April, according to Calastone’s fund flow index.
The figure for outflows tops the previous record of £795mn that was set in January this year.
Almost two-thirds (64 per cent) of UK-focused equity funds saw outflows last month, but those focused on mid-caps and smaller companies featured more prominently on the sell list, the global funds network added.
“Outflows from UK-focused funds make sense at present given the weak economic outlook, but we were surprised at just how negative sentiment was,” said Calastone’s head of global markets, Edward Glyn.
“The flow of news on the UK economy has been relentlessly bad over the last few weeks as investors have absorbed the limited and heavily criticised set of measures announced by the Chancellor to protect households from soaring inflation, while tax increases and an economic slowdown will only add to the pressure on household finances.
“This helps explain why outflows were so large. It is very telling that funds focused on smaller and mid-cap companies have borne the brunt of the selling – these companies are much more exposed to an economic downturn. A noticeable switch into UK-focused funds with an income focus is the flipside to this trend.”
Income funds, both those with a global and those with a UK focus, offer something of a safe haven, Glyn added. “The patterns of trading suggest there is a switch taking place from growth to income.”
At the latest monetary policy committee's meeting today, where six members voted to raise rates to 1 per cent, the committee said the Russian invasion of Ukraine had led to a 'material deterioration' in the outlook for UK and world growth.
Chloe Cheung is a senior features writer at FTAdviser