The latest market figures reveal that the outcome of the EU referendum prompted investors to pull out a total £5.7bn ($7.54bn) from equity funds domiciled in the UK. While June saw withdrawals to the value of £2.27bn ($3bn), in July a further £3.55bn ($4.7bn) of redemptions were made, making it the worst month for UK funds in the last three years.
According to data provider Morningstar, £438m ($579m) was also pulled from UK property funds. Some investors chose to move their capital to less risky funds in the country, such as government and corporate bonds, while others looked to markets elsewhere.
As such, Morningstar’s data revealed that in July investors poured €15.8bn ($17.82bn) into mutual funds that are domiciled in the Europe, thus indicating a marked increase in appetite for the European fund market.
Some investors chose to move their capital to less risky funds in the country, while others looked to markets elsewhere
“UK investors were selling funds quite heavily in July. [They] sold equity funds and flocked to money market funds”, said Ali Masarwah, Morningstar’s Editorial Director for Europe, Middle East and Africa. “It is typical to buy into money market funds when you see risks. It is basically shifting money into cash.”
Consequently, across June and July, outflows from UK funds were experienced by around two thirds of asset managers. According to the Financial Times, Columbia Threadneedle suffered the biggest hit, with investors pulling out £662m ($875m). Fundsmith, Jupiter and Aviva Investors, on the other hand, saw inflows of over £90m ($119m) each.
Although such figures may cause grave concern for asset managers working with UK-based investment and property funds, withdrawals have since begun to settle, while sales have also started to increase. As such, it seems the activity witnessed in June and July may have indeed just been the initial reaction to Brexit, with many expecting a return to normality in the coming months.
What does remain a concern, however, is whether the UK’s property market can withstand the aftermath of Brexit without being hit with too big a blow to both sales and value. Only time will tell.
