Investors pulled £868m from UK equity funds in January

UK-FOCUSED equity funds registered £868 million (S$1.4 billion) of outflows in January, in sharp contrast to global funds, which attracted investments as markets rebounded, said funds network Calastone on Tuesday (Feb 7).

The latest data means that UK equity funds have seen 20 consecutive months of outflows, with January’s losses being the third-largest on record.

Edward Glyn, head of global markets at Calastone, said: “The combination of January’s near-record high for the UK market, with near-record outflows, smacks of opportunistic selling against a backdrop of chronic pessimism, exploiting a moment of higher prices to head for the exits.”

The company said that for every pound of “sell” orders for UK-focused funds in January, it saw just £0.59 of “buy” orders. “No other fund sector saw a mismatch this large, and not a single trading day saw net buying,” it noted.

Fixed-income funds attracted a net inflow of £1.23 billion in January. This was the second-largest monthly bonds inflow on record, and came as investors sought to lock in higher-yielding debt before the Bank of England (BOE) stops raising rates. The BOE has raised rates 10 times since December 2021, in a bid to tame high inflation.

Glyn said there was “some rotation” happening as investors in the UK switched to global funds “that are more likely to benefit from a return to bull-market conditions”. “We have seen selling of UK funds ramp up at the same pace as buying of global ones,” he added.

“This confidence may be premature, however, as although interest rates globally are still on the up and corporate earnings are coming under pressure. This is not yet fully reflected in global markets.”

UK property funds saw a sixth consecutive month of outflows in January. Investors sold a net £48.3 million of holdings as the property sector came under pressure from rising rates and a weak economic outlook.

Several open-ended UK property funds managing around US$18 billion worth of assets had restrictions on withdrawals in place as at early January. This came after pension schemes sold property assets, to raise cash during a liquidity crisis in September 2022.

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Data from MSCI’s quarterly UK property index on Monday showed that returns on British real estate fell 11.9 per cent in the final three months of last year, in the biggest quarterly drop since 2008.

London’s FTSE 100 hit a record high last Friday, having gained about 4.3 per cent in January. REUTERS