Outflows from equity funds have reached new highs since the Brexit vote

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

Investors actively sold out of funds rather than going on a buy strike, according to Calastone, and outflows increased week over week throughout the month before leveling off at the end of March.

Global equities were hit the hardest, with investors selling a net £992 million worth of stock, while UK funds overweight in commodity stocks benefited from some protection.

Outflows from fixed income funds totaled £274 million in January, making it the worst month for the asset class since the outbreak began, though outflows were higher in February.

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

“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.

Investors continued to favor environmental, social, and governance (ESG) funds, with inflows climbing to £136 million, the highest level in two years.

According to Calastone, ESG funds received £798 million in monthly inflows on average over the last 12 months.

In March, funds also flowed out of real estate vehicles, though inflows into mixed asset vehicles were in line with average levels.

By fLEXI tEAM