UK investors pull US$842 million from equity funds in June

UK INVESTORS withdrew US$842.2 million from equity funds in June in favour of safe-haven money market and fixed income funds, fund network Calastone said on Wednesday (Jul 5), in response to rising interest rates.

Central banks in Britain, the United States and the eurozone have hiked rates multiple times in the past year to battle inflation, spooking investors.

The equity fund outflows were the largest since Sept 2022, Calastone said in a statement, when a UK “mini-budget” triggered market volatility.

The investors put £503 million (S$864.2 million) into money market funds in June, the second highest since Calastone began compiling records in 2015, and £880 million into fixed income funds.

“Fixed income funds and their money market cousins have not looked so attractive since before the global financial crisis,” said Edward Glyn, head of global markets at Calastone, adding: “recession fears are stalking equity and property markets – investors are nervous. The result is a flight to safety.”

Property funds, which have faced a number of suspensions in recent years on market turbulence, saw outflows of 79 million pounds, the biggest exodus since Sept 2022.

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Funds focused on environmental, social and governance issues (ESG) suffered a record £369 million of outflows.

In the United States, Republican politicians have attacked ESG as a way for the corporate world to implement what they argue is a politically liberal agenda, triggering a backlash from Democrats who are seeking to defend it. REUTERS