The latest Refinitiv Lipper UK Fund Flows report shows investors pulled net £26.6bn from UK funds last month, bigger than in the Global Financial Crisis and during the March 2020 Covid-19 selloff.
All asset classes were in negative territory, with equities taking the biggest hit with £13.6bn worth of redemptions, followed by alternatives (£5.1bn) and bonds (£4.7bn), reports Investment Week.
Active fund redemptions were almost ten-times that of passives, at £25.2bn to £2.6bn respectively. Meanwhile, it was a better month for passive bond funds, with positive flows of £1.6bn to £475m for mutual funds and ETFs respectively.
Despite the selloff by institutions of UK government bonds following the Mini Budget on 23 September, Bond GBP Government was the best-selling Refinitiv classification, with £834m net inflows. However, Alternative Credit Focus shed £4.7bn, mainly from funds invested in ABS.
Equity ESG funds saw £3bn of redemptions, compared to more than £10bn from their non-ESG counterparts. ESG negative flows were almost £9bn, while their conventional peers saw nearly £19bn in outflows.
Morgan Stanley and HSBC were the two largest-selling promoters, with the flows of both being dominated by money market funds.
According to the report authors, although investors sold off heavily during the Global Financial Crisis' depths of 2008 or the meltdown during the Covid-19 in March 2020, when even gold sold off, fund investors did not react as "dramatically" as they did this September.
"What is different this time is the rapid ratcheting of rates in a high-inflation environment. It is possible that, in the retail world at least, investors are cashing in to reduce their liabilities—not least mortgages—as debt service charges spiral, along with day-to-day costs," the report reads.
"Unfortunately, fund share classes are mute on this issue, though things will likely become more transparent over coming months."
