Tuesday 7 July 2020 8:00 am

Equity fund outflows hit all-time high as investors cash in after market rally

Outflows from UK equity funds hit an all-time high in June as investors cashed in on their profits following the stock market rally.

Investors bought heavily into the markets in April and early May, as prices remained depressed, before banking on gains in June.

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Last month saw the highest outflows from UK equity funds, outstripping levels seen during the Brexit referendum, lead up to the election and even the onset of the pandemic.

The latest Fund Flow Index (FFI) from Calastone shows that UK equity and equity income funds recorded outflows of £679m and £671m respectively. Every category of equity fund saw investor selling, other than global funds.

Active funds bore most of the brunt of the month’s outflows, losing £1.1bn, but investors also pulled £62m from index funds, the first outflow since October 2016.

Most of the money pulled out of equity funds was switched for the relative safe havens of fixed income and money market funds, with inflows of £927m between them last month. Given the flow of income from central banks worldwide, investors have greater confidence in bond funds.

They have now recovered half of the outflows they suffered during the volatile period in March, when the impact of coronavirus hit stocks.

Read more: Coronavirus squeezes mutual funds causing record fund outflows

“Almost all of the trading signals across Calastone’s network pointed in the same direction in June – investors bailing out of riskier fund categories into safer ones, even affecting segments like index funds and mixed asset funds that almost never see outflows,” said Calastone’s head of global markets Edward Glyn.

“In March, investors were reactive, getting caught out by the sudden market drop. Now they seem to be anticipating a significant renewed market correction – we will see in due course if that materialises.”

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