LONDON (Reuters) – UK-based investors raised a record £2.4 billion ($2.74 billion) from equity funds in September, fund network Karastone said on Wednesday. .
Net outflows have made September already the worst year ever for equity funds, but it’s also the worst month, Calastone said.
UK equity-focused funds were the worst hit, Karastone added. US equity funds also posted record outflows.
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The outflow highlights a lack of investor confidence in the UK this year. This trend has been exacerbated in recent weeks by the UK ‘mini-budget’ on 23 September. The trend included a massive underfunded tax charge that led to a sharp rise in government bond yields and a plunge in the pound.
“The near-permanent frost on UK assets shows no signs of abating,” said Edward Glynne, head of global markets at Calastone.
Overall equity fund outflows reached £4.7bn in Q3, more than withdrawn in 2016 as a whole.
Global markets have plunged in recent months as major central banks hiked interest rates to combat high inflation despite slowing economic growth.
“Surging global bond yields are driving dramatic repricing of all types of assets,” Glynn said.
Glynn said record outflows in the U.S. were due to interest rate sensitivity of growth stocks, and emerging markets were hit by the prospect of a recession and a strong dollar. He cited a loss of momentum in China to explain the outflow.
Callastone said inflows into bond funds turned “precipitously negative” in the last week of September as the market reacted to the UK government’s fiscal plan.
Funds focused on environmental, social and governance (ESG) also suffered losses, according to Callastone, the first overall outflow in more than three years.
Property fund outflows rose sharply in September, with net outflows of £89m, according to Callastone. Glyn says this is “not a property-specific issue.”
($1 = £0.8771)
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Reporting by Elizabeth Howcroft Editing by Alexandra Hudson
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