UK All Companies outflows surpass Brexit aftermath

Investors withdrew more cash from the UK All Companies sector in May than in the month after the Brexit vote, the latest figures from the Investment Association have shown.

Equities and bonds dumped as volatility hits

The UK All Companies sector has consistently been one of the worst selling retail sectors. Over the last eight years, it has snagged the title of least popular sector, except for 2013 where it was beat out by Sterling Corporate Bond.

Outflows from UK equity funds reached £1.2bn last month over eight times higher than the outflows recorded in April. The average net retail sales for the UK over the previous 12 months is -£382m.

Chris Cummings (pictured), chief executive of the IA, said the spike in redemptions was related to investor anxiety around ongoing Brexit uncertainty as the deadline for the UK’s divorce from the EU draws nearer.

Investors have now pulled £9.1bn from UK funds since the Brexit vote two years ago.

“As the clock ticks towards the UK leaving the EU, we need to see a gear change ahead of the next European Council Summit in October and significant progress being made towards a deal that will protect the wider European economy,” said Cummings.

Laura Suter, personal finance analyst at AJ Bell, added the results were “a clear sign of investor nerves around Brexit and a sluggish UK economy”.

UK growth has surprised on the downside so far this year, coming in at 0.1% over the first quarter, well below consensus of 0.3% growth.

UK Equity Income returns to outflows

The UK Equity Income sector also haemorrhaged money over the month with investors pulling £300m from funds. This was a reversal from the previous month where it ended with positive sales of £72m.

It has recorded outflows in 11 out of the past 12 months, though analysts have suggested the negative net flows were down to a few mega funds, including Neil Woodford’s £6.1bn equity income fund.

The sector has still lost money in one out of the two months since Woodford’s fund was booted from the category in March.

Absolute return comeback

The Targeted Absolute Return sector emerged as the best-selling asset class in May, marking the first time in over a year it has topped the IA’s retail sales chart.

Alastair Wainwright, fund market specialist at the IA, said the move, “signals caution amongst investors as they look to insulate themselves from market movements in the traditional equity and fixed income markets”.

The sector drew in £516m, putting it roughly £170m ahead of Global, the next most popular sector.

Sentiment toward bond funds also improved as investors became wearier of equities generally. Fixed income was the third bestselling asset class with net retail sales of £360m. Equity funds by contrast only brought in £264m during the period.

However, investor preference toward fixed income also had an anti-UK bias with Sterling Corporate Bond and Sterling High Yield down -£69m and -£121m respectively.

While Sterling Strategic Bond was the third bestseller, bringing in £168m, the IA said there were higher flows into funds with a global investment strategy, and lower inflows into funds with high UK exposure.

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