Outflows from UK funds slowed considerably in July, as investors weigh the “push and pull” of the incoming cost of living crisis.
Some £129mn was withdrawn from funds by UK savers in July, compared with £4.5bn in June, according to data published by the Investment Association today (September 6).
Investors plugged £893mn into fixed income in the month, the first month of inflows in the asset class this year, with over half of that going into corporate bonds.
However, pessimism around equity markets continued, with £1.6bn redeemed from equity funds in the month, compared with £2.2bn in June.
Investors were bearish on the UK and Europe, with £458mn withdrawn from the IA’s UK All Companies sector, and £471mn redeemed from Europe Excluding UK.
Mixed asset funds also proved unpopular, seeing redemptions of £117mn in the month, mainly in the 0-35 per cent and 20-60 per cent shares categories.
| Funds Under Management | Net Retail Sales | Net Institutional Sales |
July 2022 | £1.4 trillion | -£129 million | -£9.4 billion |
July 2021 | £1.5 trillion | £4.9 billion | £3.2 billion |
Source: Investment Association
Chief executive of the Investment Association, Chris Cummings, said though the significant outflows seen in June softened in July, the overall outlook remains uncertain.
This was demonstrated by the recent surge in UK government bond yields, he said, referring to the 14-year high seen on the two-year gilt yield seen last week, as investors bet on a rise in UK borrowing costs.
“Equity funds continue to face challenges in the current market environment as the major central banks prepare for a further round of rate rises to combat inflation,” Cummings added.
“Amidst this considerable market uncertainty, investors continue to weigh the push and pull factors of putting money aside to meet their longer-term financial goals and the impact of the escalating cost-of-living crisis on their ability to invest.”
UK investors pulled £4.5bn from 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All sectors saw outflows in June, with £2.3bn being pulled from equity funds while tracker funds saw £41mn withdrawn, only the second time the sector has seen outflows in a decade.
sally.hickey@ft.com
