Tuesday 11 February 2020 3:20 pm

UK active fund inflows nosedive on coronavirus fears

Sales of active equity funds in the UK plunged over 90 per cent in January after the coronavirus outbreak led to a collapse in investor confidence. 

Inflows into actively-managed equity funds totalled just £78m in January, a drop of 93 per cent compared to the previous month, according to figures from fund network Calastone. 

Read more: UK active fund managers suffer bruising 2019

“Stock markets have swooned since the coronavirus hit, as share prices have been marked down sharply in the expectation of slower global growth,” said Edward Glyn, Calastone’s head of global markets. 

Active funds are generally much more sensitive to changes in investor sentiment than their passive counterparts, as investors tend to trade active funds more quickly in response to market and global events.

Nine tenths of the total net equity inflow for January went into passive index funds, with the remaining 10 per cent flowing into active funds. 

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“In times when confidence is weak, active funds bear the brunt of selling, while passive funds are relatively unscathed,” said Glyn, who described investors’ verdict on active vehicles in January as “swift and decisive”. 

The swift impact of the coronavirus outbreak on investor sentiment is apparent in the figures, which Calastone said showed it was a “month of two halves” as the coronavirus outbreak dented confidence and the post-election uptick in sentiment began to fade.

In the first half of January, before the outbreak was widely reported on, equity funds saw £475m of inflows, but this slowed to just £141m during the second half as the outbreak dented investor confidence. 

Read more: 2019 was worst year on record for UK property funds

“Passive funds are cemented into regular savings plans via ISAs and pensions so investors clearly do not tinker with their passive holdings that much,” said Glyn. 

“By contrast, they trade their active funds much more dynamically, responding quickly to market events as they happen.”

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