UK funds on track to post highest outflows in a decade

UK equity funds look set to post their highest level of outflows in a decade, with investors pulling £5.7bn in the first half of 2022.

This has already overtaken the £5.2bn pulled from UK funds in the entirety of 2021 and means that, with just six months gone, 2022 has already posted the highest level of outflows from UK mandates in a decade.

Should these outflows continue in 2022, UK funds will have witnessed seven straight years of outflows since 2016.

According to data published by the Investment Association, all equity regions posted outflows in June 2022 with one exception: Japan, which saw £15mn in inflows.

UK investors pulled £4.5bn from all funds in June as increasing economic uncertainty and rising interest rates contributed to poor market performance in the first half of the year.

The figure marks the second highest monthly outflow on record, according to the Investment Association.

All sectors saw outflows in June, with £2.3bn being pulled from equity funds while tracker funds saw £41mn withdrawn, only the second time the sector has seen outflows in a decade.

Some £653mn was withdrawn from fixed income funds, and £268mn was divested from mixed asset funds, though gilts, a lower-risk asset class, saw £158mn invested.

Source: Investment Association

Chris Cummings, chief executive of the Investment Association, said savers were “pre-empting” slowing economic growth and preparing for further interest rate rises as markets entered “new territory”.

“Higher rates mean a weaker performance outlook for the high-growth companies that helped to fuel the bull market of the last decade,” he said. 

“This month’s equity fund outflows indicate that investors are looking at ways to better balance their savings.”

He added that while the current market environment presents challenges, it is more important than ever for investors to maintain a long-term view of their investments in order to realise their savings goals. 

“By demonstrating our industry’s skill and resilience, investment managers can guide investors through unchartered waters.”

The bestselling sector in June was volatility managed, with net inflows of £248mn, and global equity income coming second with £189mn in sales.

Emma Wall, head of investment analysis and research at Hargreaves Lansdown, said July fund flow tables for July showed "some optimism" had returned.

"Markets regained some earlier losses, particularly tech and US markets.

"However, the most bought funds also include those with a focus on capital preservation showing that confidence remains low, and investors are steeling themselves for a bumpy ride.”

Source: Hargreaves Lansdown

sally.hickey@ft.com