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Cautious investors pull £1.2bn from UK equities

Emma Lunn
Written By:
Emma Lunn

Political uncertainty in July saw UK equity funds suffer their biggest outflows since May 2018.

Figures from the Investment Association (IA) show that worries about a changing government, the rising prospect of no-deal Brexit and a falling pound all spooked investors in July.

UK equity funds saw their biggest outflows since May last year, with UK All Companies funds bearing the brunt with £734m pulled from the funds in July, taking the outflows over the past 12 months to £2.6bn.

The bond market, however, continued its return to favour with £2.2bn in net retail sales in July in the fifth month of positive flows, helping lift the fund market to total net retail sales of £924m. £ Strategic Bond was the best-selling IA sector in July, with net retail sales of £1.2bn.

Net retail sales experienced a fourth consecutive month of inflows, with savers placing £924m into funds.

According to investment platform AJ Bell, we’re now at the point where investors have pulled more than £13bn out of UK funds since the referendum vote, with the UK remaining one of the most unloved regions for professional fund managers too.

Experts say the inflows we saw during May now appear to be a blip, rather than a turning tide in investor sentiment.

Laura Suter, personal finance analyst at investment platform AJ Bell, said: “The only equity sector to see significant inflows was global funds, with £424m pouring in. This is unsurprising as Brexit paralysis hits the UK and fears abroad of trade wars, changing interest rate policy and increasing tensions in Asia mean investors are spreading their risk across different markets rather than picking one.

“Once again investors sought the perceived safety of the bond markets, seemingly turning a blind eye to the colossal levels of debt globally that are now paying a negative interest rate. Bonds funds saw £2.2bn of inflows, with UK Strategic Bond funds snapping up the lion’s share, with £1.2bn of inflows.

“Fears about Brexit’s impact on the property market and sluggish price growth mean UK Property funds chalked up their 10th consecutive month of outflows, with £1bn pulled from the investments during that time. Concerns about liquidity in property funds have already been raised and it’s likely fund managers will be shoring up more cash for future outflows.”