Interactive Investor

Fund outflows continue despite Brexit bounce

30th August 2016 13:26

Faith Glasgow from interactive investor

Latest figures from the Investment Association (IA) show that investors continued to pull money out of funds in the month of July, although the volume of outflows slowed markedly from June.

Retail sales suffered net outflows of £1 billion during July, particularly from equity (which saw outflows of £2.2 billion) and property funds (outflows of £792 million). In June there were net outflows of £3.5 billion on the back of the referendum vote for Brexit.

Caution clearly prevailed, as money flowed into the targeted absolute return sector (£464 million), followed by various bond sectors (a total of around £850 million) and money market funds (£292 million).

The equity fund exodus was widespread, with net outflows across all regional sectors except global, which saw a net gain of £172 million.

Investors remaining cautious

The hardest hit, unsurprisingly, was the UK, with net outflows of £1 billion, and Europe with net outflows of £922 million.

Nonetheless, the recovery in global stockmarkets during July meant that despite that net outflow, the total value of funds under management rose by 4% to a record high of £989 billion.

Although global equity markets initially fell following the EU referendum announcement, they recovered through July to produce positive returns.

"Bonds rallied and yields fell to record lows as investors sought safe assets and the market expected a rate cut from the Bank of England," commented Guy Sears, interim chief executive of the IA.

"Net retail sales were negative again in July with an outflow of £1 billion (0.11% of total assets). However, this was markedly lower than the outflow experienced in June.

"UK retail investors remained cautious as they sold out of equity and property funds, favouring fixed income, mixed-asset and absolute return strategies."

Since 23 June, the day of the EU referendum vote, the FTSE 100 has gained 9%. The index was initially hit hard in the first couple of trading sessions following the vote, but took less than a week to recoup its losses.

The domestically focused FTSE 250 index has also recovered, and is above its pre-Brexit trading level.

This article was originally published by our sister magazine Money Observer here

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.