UK equity funds lost a record $10 billion last year, new study shows

According to a new study, investors left UK equity funds at a record pace last year, with sales outpacing sales in other major markets.

 

The Calastone fund chain reported on Thursday that in 2022 the total outflow of funds from British equity funds amounted to 8.38 billion pounds ($ 9.95 billion), which is the worst figure in eight years of data registration. Equity funds are grouped investments that predominantly focus on the stocks of companies.

 

Outflows from other European equity funds amounted to £2.65 billion, from North American funds £1.17 billion and £1 billion from Asia Pacific funds.

 

According to the company, three-quarters of the losses of equity funds occurred in the third quarter, which was timed to coincide with a particularly turbulent period in British politics, when former Prime Minister Liz Truss came up with a controversial "mini-budget". But overall inflows into investment funds have been the worst in at least eight years amid rising inflation, uncertainty over the war in Ukraine, and a sharp shift by central banks from easing monetary policy to tightening.

 

Meanwhile, passive equity funds that track the stock market or market sector recorded net outflows for the first time in a year.

 

The bright spots were global equity funds in the areas of environment, social and corporate governance, which added £6.35 billion, and emerging markets funds, which added £647 million.

 

Edward Glyn, calastone's head of global markets, said the interest rate hike had "turned asset markets upside down" and forced investors to flee to cash and lower-risk funds.

 

"Sentiment has improved markedly in recent weeks, but there is tremendous uncertainty about the future course of interest rates and economic growth around the world, and we can still see the roar of bears again before the bull market cycle starts anew," he said.

 

However, this positive has not reached UK-focused funds, he said, due to forecasts that the country would suffer the worst recession among major economies.

 

A separate study released this week by State Street Global Advisors found that European exchange-traded funds showed resilience in 2022, with net inflows of $88 billion driven by shares mainly in "global developed" and U.S. "big equity" funds. Investors favored higher-quality assets and shares in the energy sector, the report said.

 

At the same time, the report notes that investors avoided broad European stocks amid the war in Ukraine, high inflation and stronger tightening of monetary policy than initially expected.