Morningstar: Equity funds leak £18bn in second-worst year on record for outflows

Money market funds were the only asset class to achieve positive net flows in 2023

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Equities funds suffered £18bn net outflows in 2023, making it second only to 2019 as the worst year on record for flows in the asset class, according to Morningstar’s latest UK Fund Flows report.

The asset class failed to record a single month of positive flows, with investors pulling £668m in December.

Money market funds, meanwhile, were the only asset class to achieve positive net flows in 2023 as investors put a net £248m into the asset class in December and £4.1bn across the year as a whole.

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In December, investors favoured sustainably-labelled funds, which recorded a modest £5m net inflow compared to the £1.7bn that leaked out of non-sustainably labelled strategies.

Sustainable funds recorded £1bn net inflows for the year as a whole, while investors retrieved £27bn from non-sustainably labelled funds.

Passive offerings continued to attract cash, pulling in a net £1.9bn in December and £21bn over the year. In contrast, active managers were hit with a £3.9bn outflow in the month and £46.7bn in 2023 as a whole.

This was mirrored in the flows recorded by individual fund groups. Passive providers such as BlackRock (£6.5bn), Legal & General (£2.8bn) and Vanguard (£2.9bn) all recorded strong inflows, while active managers such as Royal London (£8.6bn) and Baillie Gifford (£7.1bn) suffered outflows in 2023.

The top five strategies for inflows in December were all index funds, with the £10.9bn iShares North American Equity Index fund pulling in £409m.

At the other end of the scale, the £4.8bn iShares Corporate Bond Index saw £536m net outflows in the month, the largest of any single strategy.

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