Resurgent Brexit fears combined with the economic impact of the pandemic has seen investors flee from UK equity funds in record numbers.
UK equities suffered their worst three months for outflows between June and August, as investors flock to global equity funds in Europe and the US.
Investors have been preoccupied with the coronavirus outbreak but the looming prospect of a no-deal Brexit has seen investors shun UK equities.
Fund network Calastone’s latest data shows that a net £1.2bn has flooded out of funds between June and August as the government grapples with both the Brexit deadline and the recession-hit economy.
It represents an even bigger surge of outflows than in the direct aftermath of the Brexit aftermath four years ago.
No other single category of equity funds has seen outflows on this scale in the past three months. The only exception is equity income funds, heavily weighted to the UK, further reinforcing investors’ nerves.
Edward Glyn, head of global markets at Calastone said: “Not content with the economic storm caused by the pandemic, the prospect of a no-deal Brexit is once again clouding the outlook for the UK too. This is prompting investors to dump their UK holdings and switch to markets showing greater Covid-19 resilience and that don’t face Britain’s bespoke Brexit risks.
Outflows in June hit an all-time high as investors cashed in on their profits following the stock market rally. They had bought heavily into the markets in April and early May, as prices remained depressed, before banking on gains in June.
European funds are enjoying their moment in the sun and enjoying unusually high inflows over the same period. The funds saw £170m of net inflows in August alone, the first time investors have added new capital since September 2019. It followed a July that saw the lowest outflow since November 2019.