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Investors pull fresh record £2.4bn from equity funds

Investors pull fresh record of £2.4bn from equity funds as ESG portfolios see first outflow in over three years

  • Equity funds saw £2.36bn withdrawn in September, up 20% from August record
  • ESG funds saw a sharp reversal as they shed a net £126m last month
  • Property funds saw sharply higher outflows due to a ‘collapse’ in buying
  • Investors pulled a record £497m from funds focusing on US shares

ESG-themed equity funds suffered their first outflow in over three years last month as customers withdrew record amounts of cash from investment vehicles.

Investors pulled £2.4billion from equity funds in September, exceeding the previous record set in August by more than 20 per cent when investors took out a net £1.93billion, according to funds network Calastone.

ESG – environment, social and governance – funds saw a sharp reversal as they shed a net £126million of cash – the first outflow in three and half years.

ESG-themed equity funds suffered their first outflow in 3.5 years in September

Appetite for funds holding UK shares also continued to diminish, with investors pulling £694million over the month. 

UK-focused funds have now recorded their 16th consecutive month of net outflows – a longer stretch than for any other major equity fund category.

Aggressive interest rate hikes in the US saw investors pull a record £497million from funds focusing on US shares.

And a sharp slowdown in China’s economy drove a record £116million of net outflows from emerging market funds and £223million from Asia-Pacific.

The only category to see inflows was specialist sector funds, especially those focused on infrastructure and renewables, enjoying inflows of £91million last month.

Meanwhile, property funds saw sharply higher outflows of £89million, mostly due to a ‘collapse’ in investors buying in the sector amid fears over the impact of looming recession on the property market.

Some UK property funds have recently been forced to limit withdrawals to protect investors from surging outflows, primarily from pension fund investors which have been forced to bolster liquidity amid market turmoil.

Buy orders plunged to £84million, half the level enjoyed in July and the lowest since March this year, Calastone said.

Edward Glyn, head of global markets at Calastone said the: ‘The surge in global bond yields is driving a dramatic repricing of assets of all kinds.

‘UK investors are voting with their feet and heading for the exits.

‘The sensitivity to market interest rates of the big growth stocks that characterise the US market explains the record outflows there.

‘For emerging markets, the support provided earlier in the year by high metals prices has been kicked away by the prospect of a global recession.

‘The negative effects of the strong dollar for many emerging market economies are coming to the fore in its place. And the loss of momentum in China is leaching energy out of the Asia-Pacific economic ecosystem.’

Overall, during the third quarter outflows from equity funds reached £4.70billion, comfortably more than in the whole of 2016, with a total £6.63billion withdrawn since the start of the year.