FT Adviser (08/05/2019) – At what point does the mass withdrawal of funds from UK equities become something akin to a crisis of confidence?

So far, the word crisis has not been used too frequently in this context.

Amid the wider political climate, it is refreshing that asset managers, trade bodies and investors have not been too hasty with their language.

But some plain figures show that, should the trend since the referendum continue in the same vein or accelerate, the regulator and even the government might need to consider what steps, if any, might help stem the outflow.

British savers have pulled £11.4bn from UK equity sectors since June 2016, according to the Investment Association.

The association’s data also shows that during February alone, retail investors withdrew £236m from UK equity funds, and the average net retail outflows from UK equity funds since the Brexit vote are around £345m a month.

The IA has been one of many voices calling on the government for certainty, to at least decelerate the trend.

It is not an exaggeration to say the IA’s figures reflect material damage. Lobbying aside, alarm bells were ringing out long before the association’s most recent data.

Back in December 2018 (a long time in modern politics), when retail investors withdrew £315m from property funds, the Financial Conduct Authority began daily monitoring of outflows from funds available to individual investors.

Ricky Chan, director at IFS Wealth & Pensions, however, says there has been an outflow from corporate bonds in recent months.

“Since October 2018, there has been six consecutive months of outflows totalling £1.8bn, and a large spike in outflows in UK gilts in February, of £110m.”

If the UK/EU deal is secured, which results in better forecasted long-term prospects, Mr Chan thinks investors would find UK opportunities.

While he has also seen corporations relocating headquarters abroad, Chan adds: “I’m sure outflows will reverse as markets have always gone in cycles.”

Full article link: https://www.ftadviser.com/investments/2019/05/08/what-to-make-of-uk-equity-exodus/