UK equity fund outflows hit record £1.2bn between June and August on no-deal jitters

The latest Calastone Fund Flow Index found that since June, equity funds without a specific UK focus enjoyed their second-best three-month period in almost two years, with investors adding £1.6bn to their non-UK holdings between June and August.

According to Calastone, UK funds have now done worse than those investing elsewhere for five months in a row.

The index showed that equity income funds also had their worst ever three-month period due to their heavy weighting to UK equities.

Its analysis of Investment Association data suggested that approximately three-quarters of equity income funds by value are primarily focused on UK equities and said this suggests that a further £1.4bn of outflows, therefore, represent investor distaste for UK assets, adding to the £1.2bn leaving funds specifically labelled UK.

Investors turn to bonds in July as UK equities suffer outflows - IA stats

Edward Glyn, head of global markets at Calastone, said: "Not content with the economic storm caused by the pandemic, the prospect of a no-deal Brexit is once again clouding the outlook for the UK too.

"This is prompting investors to dump their UK holdings and switch to markets showing greater Covid-19 resilience and that don't face Britain's bespoke Brexit risks."

Half the outflows from active funds in the last three months are attributable to UK equity funds alone, data from Calastone found.

European equity funds experienced a turnaround in fortunes in August, with data showing that these funds saw £170m of net inflows in the month.

This is the first time investors have added new capital to European funds since September 2019, Calastone reported, following a July that saw the lowest outflow since November 2019.

Glyn added that European equities are relatively cheap compared to their "record-priced" US counterparts and the dollar is in decline.

"Funds focused on US equities had one of their worst months in the last year in August so investors may be switching focus as a hedge against the political, social and economic upheaval in the US, though we will need to see several more months of solid inflows to Europe before we can be sure this is a new trend," he said.

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• Topics
• Investment
• Calastone
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• Investment Association
• Edward Glyn
• Brexit
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• UK equity funds
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• UK equities