Investors rush to safety ahead of Brexit vote

Corporate-Bonds-Stock-Shares-Certificate-700x450.jpgInvestors moved to relative safe havens ahead of the vote on the EU referendum, with corporate bond and money market funds seeing the largest inflows in May, according to FundsNetwork.

The platform saw fixed income funds top the bestselling funds in May, with the GBP corporate bond sector seeing the highest inflows by adviser sales.

The Axa Sterling Credit Short Duration fund saw the highest sales through the adviser channel, followed by the Baillie Gifford Investment Grade Long Bond fund. Other bond funds to see significant inflows included the Threadneedle UK Short Dated Corporate Bond fund and the Smith and Williamson Short Dated Corporate Bond fund.

Isa investors on the platform also took the opportunity to move money into cash, to put to work after the referendum, the data shows.

Danny Wynn, head of fund partners for Fidelity International, says: “With pre-referendum uncertainty dominating investor thoughts, it is no surprise that we saw them pile into the relative safety of fixed income and the money market sectors in an attempt to shield their portfolios from the volatility.”

However, he predicts that investors will make use of the market volatility in the coming weeks to seek undervalued assets.

“While it’s likely we’ll see investors continue to adopt a risk off approach and allocate towards safe haven assets following the UK’s decision to leave the EU, once the dust settles and the initial volatility recedes we expect to see advisers and investors re-enter equity markets looking for value,” says Wynn.

“As a result there is a possibility we could see investors making some tactical allocations into more diverse range of assets over the next few months.”

Amid the market volatility of last Friday, many investors were buying rather than selling, data from AJ Bell shows. Of the trades on its platform, which saw a fivefold increase in volumes during the day, 74 per cent were buying, while 26 per cent were selling.

Investors had also increased new cash deposits on the platform by 50 per cent in the three days leading up to the referendum, says AJ Bell.