Equity fund outflows climb to highest levels since Brexit vote

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Investors withdrew £1.53 billion from equity funds in March, the largest outflow since July 2016 at the time of the Brexit referendum, according to Calastone’s latest fund flows report, as Russia’s invasion of Ukraine continued to rock markets.

Investors actively sold out of funds, Calastone states, as opposed to going on a buy strike, and outflows increased week-on-week over the month before tailing off at the end of March.

Global equities suffered the greatest impact, as investors sold down a net £992 million of their holdings in this category, while UK funds overweight commodity stocks benefitted from some protection.

Fixed income funds also suffered outflows, totalling £274 million, making it the worst month for the asset class since the start of pandemic, though outflows were higher in February.

“The world’s major stock markets were very volatile in March, but they have mostly regained the losses they sustained when Russia attacked Ukraine on 24 February,” said head of global markets at Calastone, Edward Glyn.

“This has not been enough to reassure UK fund investors. Global risks are rising – growth prospects have deteriorated, and a recession is now a possibility in many developed countries. Inflation is taking hold, living standards are being squeezed and government budgets are also under pressure.”

“Against this backdrop, it’s easy to see why March saw the largest net outflows from equity funds in almost six years and why bond funds are out of favour too,” he added.

Environmental, social and governance (ESG) funds remained in favour among investors, as inflows climbed to £136 million, though this was the lowest inflow figure in two years.

ESG funds averaged monthly inflows of £798 million over the past 12 months, according to Calastone.

Funds also flowed out of real estate vehicles in March, though in the mixed asset space inflows were in line with average figures.

Source: Funds Europe

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