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UK investors pull £24.3bn from IA funds in 2023

UK equity strategies suffered £14bn net outflows over the year

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UK investors pulled a net £24.3bn from funds in 2023, according to the Investment Association’s (IA) latest fund flow data.

The outflows were driven by equity funds, which faced a challenging year after experiencing £22bn in withdrawals. In particular, UK equities saw £14bn pulled in the sector’s eighth consecutive year of outflows.

Money markets was the best selling asset class in the year, closing out 2023 with £2.2bn invested overall.

See also: Spring Budget 2024: Chancellor increases VAT threshold

Fixed income followed in second with £716m net inflows. Notably, gilts saw £2.5bn invested, with a net £2bn pouring into government bonds as a whole as investors were attracted by higher yields over the year.

Meanwhile, Volatility Managed was 2023’s best-selling IA sector with inflows of £2.7bn.

Responsible investment funds experienced declining sales throughout the year reaching a £3bn outflow.

Investors also continued to lean towards tracker fundswith flows remaining positive at £13.8bn over the year with only one month of outflows, despite a tough year overall for fund sales.

Meanwhile, outflows from active funds hit £38.1bn in 2023.

Miranda Seath, IA director, market insight & fund sectors, said: “The cost-of-living crisis and economic uncertainty has continued to impact households across the UK, with investors withdrawing just under £24.3bn from funds.

“The impact of higher interest rates was a key factor in retail investor activity and decision-making. Cash savings accounts offered attractive interest rates for the first time in over a decade, impacting net retail sales.”

She added: “As we look ahead, we will see how UK investors respond to market shifts in 2024. When, how fast and how far Central Banks cut interest rates remains crucial. In January, investors took out £1bn out of funds, however Tracker funds continued to see strong inflows at £1.7bn.

“It is also an election year in the US, India and UK, and political change could impact the investment outlook. However, the impact of the market shocks we saw in 2022 have dissipated to a large extent.”

FUM and net sales for 2023

                                   Funds Under Management    Net Retail Sales    Net Institutional Sales    
2023£1.4trn   -£24.3bn -£33.5bn   
2022  £1.4trn   -£26.9bn-£23.4bn  
Source: Investment Association

This article was written for our sister title Portfolio Adviser

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