Investments  

September second-worst month for UK retail funds on record

September second-worst month for UK retail funds on record
The UK's short-lived former chancellor, Kwasi Kwarteng, whose "mini" Budget caused turbulence across financial markets in the UK (REUTERS/Clodagh Kilcoyne/File Photo)

UK investors continued to desert retail funds in September, withdrawing £7.6bn amid volatile markets and a looming recession.

The high volume of sales, which marked the second-worst month for funds in the UK after March 2021, was centered on equity funds which saw £5bn redeemed according to the Investment Association.

September, which saw the introduction of the “mini” Budget and subsequent chaos in bond and currency markets in the UK, marked the eighth month of outflows for the nation's funds, which have seen £22bn withdrawn so far this year.

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This is in comparison to £43bn invested on a net basis last year, and £30bn the year before.

The year-to-date has seen a reversal in the low-rate, low-inflation environment investors have enjoyed for over a decade.

Inflation in the UK has been running over the Bank of England’s 2 per cent target rate since May last year, and in the year to September prices rose by 10.1 per cent.

Funds under management and sales in the UK in September

 

 Funds Under Management 

 Net Retail Sales

Net Institutional Sales 

September 2022   

£1.3tn 

-£7.6bn 

-£6.1bn

September 2021 

£1.5tn 

£2.4bn

-£2.2bn
Source: Investment Association

This has triggered rising interest rates across global markets, leading to sluggish economic growth and concerns about an incoming recession.

Chief executive of the IA, Chris Cummings, said: “The political and economic uncertainty over the last few months came to a head with the fiscal policy announced in the ‘mini budget’ in late September.

“We have seen outflows from funds in eight of the first nine months of 2022, and while volatile markets can provide opportunities, investors are still waiting for a period of relative market and economic stability.” 

UK equity funds, which have suffered continuous outflows in recent years, saw outflows of £1.3bn.

Responsible investment funds saw their first month of outflows since February 2021, with £211mn flowing out, and tracker funds lost £264mn of investment.

The IA’s figures show some investors saw an opportunity in the cheap price of bonds in September.

UK gilt funds were the top best-selling sector in the month, with net sales of £412mn, followed by UK index-linked gilts with £202mn invested.

UK gilts bore the brunt of the “mini” Budget, the contents of which were mostly reneged weeks later after the cost of government debt soared.

sally.hickey@ft.com