Investors pulled a net £53.9bn from UK funds in 2022, the largest yearly outflow on record, according to Refinitiv Lipper.
UK equities bore the brunt of the outflows, making up £34.9bn of net redemptions across the year. In comparison, equity fund outflows at the peak of the 2008 financial crisis were just £8.3bn.
Last year’s figure, which excludes money market strategies, dwarfs the previous record set in 2019 when investors pulled a net £11.2bn.
With money market funds included, UK net fund flows were still £41.1bn in the red, with the asset class the only to achieve net inflows last year.
Head of Lipper Research UK & Ireland, Dewi John, said: “For the first three quarters [money market funds] were in redemption mode, with investors likely responding to the corrosive effects of inflation on an inherently low-yielding asset class. Yet in Q4, £53.4bn flooded into these vehicles following hard on the late-September mini budget as pension funds sought liquidity above all else. We’ve seen that drip back into the market since October but at a much slower rate than that of October’s flight to cash.”
More broadly, John observed investors started the year with a degree of “cautious optimism” following hopes of a post-Covid recovery. However, investors grew risk-averse, with redemptions shooting up throughout Q2 and Q3.
He said: “Last year was a turbulent and hugely significant period for UK fund markets. Record redemptions were clearly driven by a number of factors; including war in Ukraine from February; spiralling rates and inflation throughout the year; and, from late September, the effects of a mini-budget that saw institutional funds redeem cash from risk assets and stow it instead in money market funds.”
Sustainable funds continue to draw in investor cash
Although almost all asset classes suffered outflows, there were reasons for optimism for some sectors.
While investors pulled £66.9bn from conventional funds, sustainability-focused strategies attracted in a hefty £27.6bn over the year.
Despite a year of turmoil performance-wise for fixed income investors, only a net £2.6bn was withdrawn from the asset class.
Multi-asset strategies also saw relatively minor outflows of £1.2bn, while funds in the asset class with a high sterling weighting attracted net inflows.
See also: Investors shun UK equity funds at home and abroad in January
