UK property funds endured the largest and most sustained withdrawals on record in 2019, with total outflows of £2.2bn, as the industry was dented by weakening sentiment over Brexit and the fallout from the M&G real estate fund suspension.
The figures, which are equivalent to £1 in every £15 under management in property funds being withdrawn, were collated by global fund transactions network Calastone.
Real estate funds suffered a 15th consecutive month of outflows in December. Overall, net withdrawals totalled £314m, with the value of sales more than twice that of the value of purchases.
The figures represent the second worst monthly performance since 2015. The only larger outflows recorded were in the immediate aftermath of the EU referendum in 2016.
M&G suspended trading in its £2.5bn property fund early last month following unusually high investor withdrawals, which the asset manager blamed on ongoing Brexit-related political uncertainty.
“Although some funds have fared better than others, the net selling has been pretty indiscriminate,” said Calastone head of global markets Edward Glyn.
“The suspension of a major fund in December has only spurred further outflows from the sector, as investors fear their capital becoming trapped in funds unable to trade,” he added.
By contrast, UK equity funds saw record inflows in December, marking a positive end to a lacklustre year for the sector, which spent many months lagging behind European rivals amid Brexit uncertainty.
But the Conservatives’ decisive General Election victory provided investors with more certainty that the UK would leave the EU, and they poured a net £1bn into UK-focused equity funds last month.
Fund inflows spiked following the election on 12 December, with net inflows in the 11 post-election trading days hitting levels three times higher than the start of the month.
“December proved just how powerful the influence of politics is over investor activity,” said Glyn.
“Regardless of the relative merits of Brexit or remaining in the EU, an end to the UK’s political deadlock and a clearer path for the country (at least in the short term) is unleashing enormous pent-up demand for UK equities in particular, whose performance has lagged far behind their peers elsewhere in the world,” Glyn added.