UK investors pulled £822mn out of funds in May as the uncertain economic climate continued to take its toll on market sentiment.
According to the Investment Association, £1.2bn was withdrawn from equity funds in the month, with £620mn redeemed from fixed income funds.
This compared to withdrawals of £423mn and £3mn respectively in April.
Corporate bonds and UK equities in particular had a bad month, experiencing £1.8bn and £1.2bn respectively in redemptions.
Investors turned to mixed-asset funds in the month with inflows of £653mn, which Chris Cummings, the IA's chief executive said was due to investors seeking to diversify their portfolios.
“With the major central banks maintaining a clear trajectory towards curbing inflation through rate rises, the recent outflows from bond funds have slowed compared to earlier in the year,” he said.
“Higher rates may dampen economic growth and the market outlook remains uncertain.
"However, with inflation at a 40-year high, the general importance of investing for the long-term to prevent savings from losing their real-term value remains as true as ever.”
Fears are growing of an impending recession after inflation has continued to soar in developed markets despite central banks embarking on a series of rate hikes.
Indeed the single biggest selling IA fund sector during May was the Short Term Money Market sector, which saw inflows of £524mn.
Last month, Bank of England governor Andrew Bailey warned that the UK will see more persistent inflation than the EU, highlighting the potential impact of a jump in energy prices in September when the cap is reviewed.
Global equity markets have also suffered, experiencing one of the worst first halves of the year so far with double digit drops.
The US in particular struggled, with the Nasdaq losing 30 per cent in the first six months of 2022, closely followed by the S&P 500 which crashed 21 per cent in the period.
Despite this, North American funds saw net inflows in May, with £444mn invested in the four weeks, alongside flexible investment which saw investors plug in £429mn.
The UK All Companies sector has continues to see large outflows, with £888m pulled in May.
But it has interrupted its run of being the single worst-selling sector - a position it has held for eight of the last 10 months.
Since the start of 2022 some £5bn has been pulled from UK funds, which is nearly as much as was pulled from these funds in the entirety of 2021.
sally.hickey@ft.com
