Fund Brexodus slows in July after "quite extraordinary" investor outflows in EU referendum month

William Turvill
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The slowing in outflows was helped by the fact several property funds suspended trading in July (Source: Getty)

Outflows from the UK fund industry continued in July, but slowed after a “quite extraordinary” investor exodus in June, the month of the EU referendum.

Net outflows totalled £1bn in July – an improvement on £3.5bn in June – according to the Investment Association.

The strongest outflows last month came from equity funds, £2.2bn, but this was down from £2.8bn in the referendum month.

Read more: Brexodus: Retail investors took £3.5bn out of funds in referendum month

Some £295m was taken out of Isas and £93m from tracker funds. The IA reported inflows of £1.1bn in fixed-income funds, £195m in mixed-asset funds, £109m in funds of funds and £43m in ethical funds.

Property outflows, meanwhile, slowed from £1.5bn in June to £792m in July. Hargreaves Lansdown noted that this was “hardly surprising”, given that many funds in the sector suspended trading on funds during the month.

Total funds under management reached a record high of £988.6bn in July – up from £948.7bn in June, and £927.3bn the year before.

Guy Sears, interim chief executive of the IA, said:

Although global equity markets initially fell following the EU referendum announcement, they recovered through July to produce positive returns. Bonds rallied and yields fell to record lows as investors sought safe assets and the market expected a rate cut from the Bank of England.

Net retail sales were negative again in July with an outflow of £1bn (0.11 per cent of total assets). However, this was markedly lower than the outflow experienced in June. UK retail investors remained cautious as they sold out of equity and property funds, favouring fixed income, mixed-asset and absolute return strategies.

Read more: Investment Association calls for greater flexibility to "rebuild trust"

“In the aftermath of the Brexit vote, investors fled risk and bought safety,” said Hargreaves Lansdown senior analyst Laith Khalaf.

The pace of withdrawals moderated from June, largely down to substantial inflows into bond funds and the trading suspension imposed by much of the property sector, which put a lid on redemptions. The irony is that despite large outflows from equities, rising markets have nonetheless propelled total funds under management to a record high of almost a trillion pounds.

There was extremely negative sentiment towards markets in the immediate wake of the referendum, though the continued strong performance of stocks, combined with the Bank of England’s stimulus package, is likely to result in a bit more positivity in August. While large sums have clearly been withdrawn from equity funds, the yields on offer from bonds and cash are pretty crummy right now, and for long term investors the stock market at least gives them a fighting chance of beating inflation.

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