IA reports £3.5bn outflows in Brexit month

Money-Notes-Currency-GBP-Pounds-700.jpgThe Brexit vote has dramatically hit fund flows shedding £3.5bn in the month of June, latest data from the Investment Association shows.

Retail investors redeemed £3.5bn from funds in June compared to £1bn the same month a year ago and negative £338m in May.

Of the redemptions, equity funds saw the largest net retail outflow for any asset class losing £2.8bn.

Property funds were the worst performing sector with £1.4bn outflows, mostly due to fears over falling property values in the wake of the Brexit vote.

This compares to outflows of £367m from property in the previous month.

In contrast, investors rushed into fixed income funds which were the best-selling asset class in June with net sales of £258m. Within these, global bonds topped the best selling sector reaching £250m retail sales for the period.

In terms of regions, UK equity funds saw the largest outflows in June, losing £1bn, closely followed by European equity funds which had outflows of £813m.

Investment Association interim chief executive Guy Sears says: “The retail outflow in June occurred in the context of record levels of funds under management, and represented just 0.37 per cent of total assets during a period of intense market volatility.

“Clearly, Brexit has been unsettling, with property and equity funds particularly affected following earlier outflows during 2016. At the same time, flows were positive into fixed income and targeted absolute return sectors as investors sought safer harbours.”

However, Sears notes that in the first six months of this year, industry funds under management steadily grew by £22.6bn to the current £947bn despite market volatility.

Sears says: “Fixed income funds saw the largest growth in funds under management in the year to the end of June with £13bn. Funds under management in mixed asset funds increased by £5.2bn and equity funds grew by £1.4bn.”

Despite the “unsurprising” data for June, Tilney Bestinvest managing director Jason Hollands says July’s data will indicate whether the post-Brexit scenario is as gloomy as many predict.

He says: “Amongst our own clients we saw increased new investment activity, initially from clients buying into the sell-off but which broadened out as markets stabilised and the sky did not fall in after all.

“A risk now is that because of a myopic focus on Brexit in recent months, investors may have become immune to other, much greater risks hanging over the markets that have not gone away. In our view, China continues to pose a considerably bigger risk than Brexit ever did, given its persistent pursuit of debt fuelled stimulus and worrying manufacturing overcapacity.”