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In April, outflows from UK equity funds reached new highs

As investors sought safe havens for their money, they withdrew £836 million from equity funds in April, just beating the previous high set in January this year.

During this time, two-thirds of UK-focused equity funds saw outflows. According to an analysis by funds network Calastone, mid-caps and smaller companies were more prominent on the sell list.

Actively managed funds bore the brunt of the outflows, accounting for nearly three-quarters of the net total.

According to Calastone, no net new money has flowed into UK-focused funds out of £49 billion invested in equities funds since January 2015.

In other news, North American equity funds saw their second-highest outflows ever, totaling £285 million for the month, while technology funds saw their fifth month of net selling.

With £1.58 billion in inflows in April, global funds defied the trend, but Calastone noted that it should be "cconsidered a correction of excessive negativity in March which saw record selling to the tune of £977 million."

"Two-thirds of the April inflow to global funds went to global ESG equity funds, and no month has seen outflows from ESG funds in over three years."

With the exception of ESG funds, equity funds saw outflows of £245 million for the fourth month in a row.

"Investors are wary," said Edward Glyn, head of global markets at Calastone, "everywhere we look, risk-off trades are dominating the picture ."

"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," he added.


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