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Investors continue to withdraw from UK equities

9 September 2019

UK equity funds further lost favour with investors in July as £1.2 billions was withdrawn in the month, with commentators pointing at political instability, fears around a No Deal Brexit and a falling pound leading to withdrawals from UK sectors.

Data from the Investment Association showed UK All Companies funds bore the brunt, with £734m pulled in July, taking the outflows to £2.6bn over the past 12 months. Since the referendum in 2016, investors have pulled more than £13bn out of UK funds.

Amid the growing uncertainty, investors fled to the perceived safety of the bonds market, with bond funds attracting £2.2bn of inflows in July, according to the trade body. Sterling strategic bonds enjoyed the lion’s share, with £1.2bn pouring in.

Laura Suter, personal finance analyst at AJ Bell, said of the figures: “This is unsurprising as Brexit paralysis hits the UK and fears abroad of trade wars, changing interest rate policy and increasing tensions in Asia mean investors are spreading their risk across different markets rather than picking one.

“Once again investors sought the perceived safety of the bond markets, seemingly turning a blind eye to the colossal levels of debt globally that are now paying a negative interest rate.”

Adrian Lowcock, head of personal investing, Willis Owen, commented: “Whilst the UK continued to be shunned by investors due to Brexit uncertainty, the shift out of equities in July was broader, and didn’t just impact the UK.

“Investor confidence had been deteriorating over the past few months as concerns over the strength of global growth weighed on the outlook, and with the US-China trade war intensifying, whilst tensions with Iran added to concerns. Then there is the economic data which showed a number of economies, including the UK, are now shrinking and at risk of falling into recession.”

Lowcock added: “In this environment and given some of the gains stock markets have made in 2019, it is hardly surprising that investors shifted to bonds as they locked in gains and looked to position themselves for a world of falling interest rates, led by the US Federal Reserve cutting rates.”

Nigel Green, chief executive of deVere Group, added: “Against the somewhat bleak outlook, UK domestic investors and global investors with exposure to UK assets should revise their portfolios accordingly.

“They should remain invested and ensure their portfolios are truly diversified across asset classes, sectors and regions.”

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