UK equity funds saw the highest level of outflows on record during August, according to data from the Investment Association.
Some £2.9bn was redeemed from equity funds in the month, compared with £1.3bn invested in the products in August 2021. UK equities were particularly bruised. Investors pulled out £1bn, with £828m flowing out of global equities. This is almost double the £458m withdrawn from UK equity funds in July.
Inflation hit 10.1% in the UK, on its steepest upward gradient in 40 years, as the cost of food, non-alcoholic drinks, and transport rose. Investors flocked to safer assets amid market volatility, with bond funds seeing net inflows of £1bn. Strategic bond funds were the most popular sector overall, with £288m invested. Mixed bonds saw £205m and corporate bonds rose by £172m.
Infrastructure was another popular sector, with £205m invested overall in the month, while volatility managed funds saw £194m invested.
AI chief executive Chris Cummings noted that, while August is traditionally a quieter month for fund sales, political and economic uncertainty meant savers had to continue navigating challenging market dynamics. ‘UK households are heading into a challenging winter,’ he said, ‘and grappling with a cost-of-living crisis that could impact their ability to put money aside. With market dynamics in a state of flux, we could see investors reacting to the surging yield on gilts and UK corporate bonds, or biding their time until we see a period of relative calm.’
A quarter of funds, £5.9bn in total, were sold through IFAs in August, a slight drop from the 29% seen in July.