UK-focused equity funds saw record outflows in April, according to new data from the Calestone Fund Flow Index (FFI).
Investors pulled £836 from the category, just beating the previous record set in January where investors sold down a net £795m of their UK-focused equity fund holdings.
Two thirds of UK-focused equity funds reportedoutflows during the period, but those focused on mid-caps and smaller companies features more prominently on the sell list.
Among the most heavily sold twenty funds, seven were in these categories, but none were among the twenty most bought ones.
Together, these two categories of UK-focused equity funds accounted for two fifths of the net outflows from UK equities overall.
This represents a much larger share of the fund flows for these categories than assets under management.
Actively managed funds were among the hardest hit by the outflows, accounting foralmost three quarters of the net total, as small-cap and mid-cap funds are more likely to be actively managed.
The UK was not the only region investors chose to avoid in April North American equity funds reported their second highest outflows on record at £285 million.
Europe-focused funds redemptions were up £168 million month on month. Among funds with a sector focus, technology funds saw their fifth consecutive month of net selling.
Global fund inflows partially offset record selling in March and were dominated by ESG funds.
Global funds stood out with £1.5 billion of inflows in April. While appearing strong, it can reasonably be considered a correction of excessive negativity in March, which saw record selling of £997 million.
Two thirds – or £1 billion - of the April inflows to global funds was devoted to global ESG equity funds, continuing the secular trend of new capital flowing into the burgeoning category .
No month has seen outflows from ESG funds in over three years.
Excluding ESG funds, equity funds overall had outflows of £245 million, the fourth consecutive month of outflows.
Among other asset classes, bond funds generated inflows of £610 million.
Fund network, Calastone, revealed figures showing that the preference for lower risk options was evident in foxed income funds too. Funds focused on short-dated bonds, which are the least volatile and are considered a safe place for capital in times of uncertainty, generated inflows.
Edward Glyn, head of global markets at Calastone said: “
“Outflows from UK-focused funds make sense at present given the weak economic outlook, but we were surprised at just how negative sentiment was.
“The flow of news on the UK economy has been relentlessly bad over the last few weeks as investors have absorbed the limited and heavily criticised set of measures announced by the Chancellor to protect households from soaring inflation, while tax increases and an economic slowdown will only add to the pressure on household finances.
“This helps explain why outflows were so large. It is very telling that funds focused on smaller and mid-cap companies have borne the brunt of the selling – these companies are much more exposed to an economic downturn. A noticeable switch into UK-focused funds with an income focus is the flipside to this trend.”
The previous Fund Flow Index from Calastone, for month end March 2022, revealed the impact of the conflict in Ukraine on confidence in both equity and fixed income funds.
Equity funds experienced their biggest outflow in six years, with £1.53 billion withdrawn in March. This was the largest outflow since July 2016, immediately after the Brexit referendum.
