Investment Association data shows that investors pulled £2.4bn from equity funds in September, including £534 million from multi-asset funds.
Referring to the results as a “summer glow [coming] to an end in September”, the Association said net retail sales of overall investment funds saw outflows of £3.4 billion. This followed positive net flows in July and August (£1.4 billion and £806 million). September took Q3 net retail sales to a £1.2 billion outflow, which contrasts with the £4.4 billion inflows recorded in the previous quarter.
Outflows were heaviest in equities, as investors pulled a net £2.4 billion, a significant increase on the £424 million outflow in August. The only region to remain in inflow was North America, with net retail sales of £101 million, down from £527 million in August.
Mixed asset funds saw outflows climb to £534 million, from £192 million in August. September’s figure includes record outflows from the Mixed Investment 40-85% Shares sector of £354 million, as the prospect of CGT rises impacted sectors targeting capital growth as investors anticipated an increased tax take on equity investments held outside ISAs and pension wrappers.
Bond fund net flows turned negative with outflows of £116 million, following an inflow of £1.8 billion in August.
Inflows to index tracking funds remained high at £1.7 billion, although following a period of very strong sales to index tracking funds inflows were the lowest since October 2023 when net retail sales were £363 million.
Responsible investment funds saw record outflows of £604 million, exceeding the previous record outflow of £541 million in October 2023.
Miranda Seath, Director, Market Insight & Fund Sectors at the Investment Association, said a contributing factor to a surge in outflows across equities looks to have been the impeding Budget and expectations around a rise in capital gains tax (CGT).
She aded: “Investors have also been impacted by the uncertainty over Labour’s fiscal strategy, in the drawn out run up to the Budget. The ensuing rise in Gilt yields shows that market reaction to the Budget has been mixed, but not as severe as in September 2022,
“In the longer term, and with the Budget now in the rear-view mirror, there does appear to be some clarity for investors, but only if the Chancellor is able to stick to her commitment to setting long-term and stable fiscal policy, and achieve growth, without raising taxes further. Looking ahead to the final quarter of 2024, Trump’s US election victory will be a more significant factor in the fortunes of markets around the world and investors will be watching closely.”
Also commenting on the data, Kate Marshall, lead investment analyst, Hargreaves Lansdown, concurred that it was “not a huge surprise to see investors pulling money back out in September, ahead of Labour’s first Budget.
During the first month of Autumn, investors turned their focus to the impending Budget, and the almost inevitable rises in Capital Gains Tax (CGT). Not wanting to get caught out by higher tax bills, investors locked in profits. For some, this felt the right call given CGT was hiked from 20% to 24%, while the lower rate increased from 10% to 18%.”
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