Thursday 5 September 2019 11:25 am

Political uncertainty spooks investors as UK equity outflows increase

Cautious investors pulled £1.2bn from UK equity funds in July, with outflows increasing amid heightened political turmoil.

UK equity funds experienced net outflows of £1.2bn, a significant increase on the £744m of outflows reported for June, according to figures from the Investment Association (IA). The funds have consistently seen new outflows over the past year, with the exception of an inflow of £543m in May and no net movement in April.

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IA chief executive Chris Cummings said the equity outflows were caused by investors response to “the ratcheting up of uncertainty in the UK, triggered by the change in political leadership”.

Net retail sales experienced a fourth consecutive month of inflows, with savers investing £924m into funds, but the figure represents a significant decrease on the £2.3bn ploughed into funds in June.

Investors continued to gravitate towards bonds, a perceived ‘safe haven’ in times of uncertainty. UK Strategic Bond funds were the best-selling sector during July, with net retail sales of £1.2bn – the largest inflows since November 2017, and edging ahead of June’s £1.1bn of inflows.

Global Bonds were the third most popular sector with net retail sales of £406m, coming in just behind the Global sector’s £424m.

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Ethical funds continued to grow in popularity in July, with IA recording net inflows of £248m – up from £234m in June – taking the sector’s total funds under management to £20bn.

“Appetite for stocks and bonds was poles apart in July 2019,” said IA chief executive Chris Cummings, “as savers looked to weather the ongoing political and economic uncertainty by diversifying their investments and seeking out safe haven assets.”