Equity funds experienced net outflows for the first time in almost a year, according to the latest data from Calastone, with money removed in aggregate weighing in at £564m.
Outflows of £666m were seen from UK equity funds alone, although these were offset by modest inflows from across all other types of regional funds.
European equity funds saw the biggest fall in inflows compared to its monthly average over the last year, at £43m compared to £249m. While global and US equity funds saw the biggest inflows of £422m and £413m respectively, all geographically-focused funds saw lower-than-average capital injections from investors.
Income-focused equity funds, of which many have large UK weightings, saw outflows of £416m. Specialist funds also suffered record new outflows at £512m, with investors shunning gold funds and ‘green funds’ in particular.
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Edward Glyn, head of global markets at Calastone, said: “Global markets had a rocky start to September but finished the month in positive territory. There is clearly growing caution about growth – the sharp drop in inflows to European funds accompanies a slew of negative news coming from the eurozone.
“The UK top 100 index ended the month a touch lower, while UK small and mid-cap indices were flat. The new government’s rather pessimistic commentary about the UK economy appears to have put a stop to the nascent revival in interest in domestic equities that we first detected in trading data in July.
“UK-focused funds seem to be off the menu for investors for the time-being.”
Fixed income
In terms of asset class, however, fixed income funds shed the most money during September at £769m. Combined with August’s outflows of £516m, this marked the biggest net loss of investor capital within bonds over Calastone’s 10-year history – with the exception of the pandemic-induced “flash crash” in April 2020.
Instead, cash flowed into money market funds, with investors adding £83m into the asset class in September. This trend has tempered since August however, with £593m of net inflows into market money funds during the previous month.
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Glyn said: “Bond markets have rallied strongly over the last six months with yields plummeting as investors watched economies cool around the world and priced in the likelihood of falling interest rates (falling yields mean higher bond prices).
“Expectations ran high that the US Federal Reserve would cut rates by half a percentage point in mid-September – which it duly delivered – so investors seemingly followed the adage ‘buy the rumour, sell the news’ and banked their gains.”
This story was written by our sister title, Portfolio Adviser
