Investors withdraw record £8.7bn from UK funds

Investors withdrew £8.7 billion from UK-domiciled funds in March as the Covid-19 pandemic sparked panic and British funds suffered their largest ever monthly outflows, according to the latest Morningstar data.

However, Morningstar said some areas of the stock market managed to attract new money — with investors pouring £2.1 billion into large-cap UK equities despite the fact that the FTSE 100 plunged 25% in the month. 

Two FTSE tracker funds were the best-selling products in the month. 

While investors took almost £4 billion out of actively-managed equity funds in March, passive funds atttracted £3.1 billion of assets.

“Given a widespread belief that UK equities were undervalued going into the coronavirus sell-off, a drop of 30%-plus encouraged many investors to invest heavily in UK large-cap equity funds,” said Morningstar analyst Bhavik Parekh. 

“Passive vehicles in this space saw a large net inflow as investors looked to take advantage of nine-year lows in the UK equity market.”

As central banks around the world cut interest rates, fixed income funds experienced the biggest outflows, losing £5.5 billion in March for their highest monthly outflow on record. 

“Cuts in interest rates and spending by central banks was, at first, not enough to abate market concerns and bond prices were slashed, particularly in the high-yield sector,” said Parekh.

Nonetheless, the analyst added some context.

“While outflows of £8.7 billion is clearly a large figure, it is important to note that as a percentage of assets, less than 1% of assets were withdrawn,” added Parekh. 

“On a relative basis, March’s net outflow was only comparable to October 2008.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.