Investors dump £8bn from UK equities since Brexit vote

FTSE highs failed to entice investors in April as they continued to pull money from UK equity funds, according to the latest monthly sales figures from the Investment Association.

UK equity funds suffered outflows of £142m during the month, taking total redemptions since the Brexit vote to £7.9bn.

AJ Bell personal finance analyst Laura Suter said since the EU referendum investors have pulled £1.8bn from the UK Equity Income sector, while £5.8bn has been pulled from UK All Companies. Suter noted investors “tentatively” moved back into the UK Equity Income sector in April.

The sector attracted £72m in contrast to £261.1m net outflows from the UK All Companies sector.

Investment Association fund market specialist Alastair Wainwright said those that have remained invested in the UK were rewarded in April with the FTSE 100 returning 6.8%, while the All Share returned 6.4%.

“This was helped in no small part by an increase in the price of oil which boosted the energy sector,” Wainwright said.

Global and North American equities were the best-selling sectors attracting £586m and £446m respectively. Global Emerging Markets were also popular with net retail sales of £267m. The sector had average monthly inflows of £52m over the previous 12 months, Wainwright noted.

Bank of England hokey cokey

Strategic Bond fund sales were flat in April following £7.8bn inflows in 2017. It follows March sales data, whereby the sector suffered its first outflows since the Brexit vote.

“It seems Bank of England governor Mark Carney’s hokey cokey with interest rate rises has deterred investors from the sector,” Suter said.

Last month, Carney re-earned his moniker of an ‘unreliable boyfriend’ when the Bank of England’s Monetary Policy Committee voted to hold rates at 0.5% despite a hike being considered a done deal following the committee’s meeting in March. He has since said the MPC may have to cut rates in the case of a disorderly UK exit from the European Union.

Isa season

Isa sales were £256m in the first five days of April as the end of the tax year approached. A further £675m went into funds via the tax wrapper for the remainder of the month bring total inflows to £931m.

The figures are down on the five-year average, which normally sees Isa sales spike to £2bn in April compared to a monthly average of £1.2bn.

Architas investment director Adrian Lowcock said he is not surprised Isa inflows have halved.

“There’s been a softening of the Isa season. Isa allowances at £20,000 now is so big the majority of people aren’t going to use their allowance each year.”

Wainwright said equity and mixed asset funds were most popular with Isa investors with around £1.2bn of net sales in both asset classes in the 2017/18 tax year, based on data from Cofunds, Fidelity, Hargreaves Lansdown, Old Mutual Wealth and Transact. Funds of funds were the most popular vehicle, with £3.1bn in net sales in the 2017/18 tax year.

 

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