Investors squeeze new record £2.4bn from equity funds as ESG portfolios see first outflow in more than three years
- Equity funds saw £2.36bn withdrawn in September, up 20% from August’s record
- ESG funds saw a sharp reversal losing £126m last month
- Real estate funds saw significantly higher outflows due to a ‘collapse’ in buying
- Investors withdrew a record £497m from US equity-focused funds
ESG-themed equity funds suffered their first exit in more than three years last month as clients withdrew record amounts of cash from investment vehicles.
Investors withdrew £2.4bn from equity funds in September, surpassing by more than 20% the previous record set in August when investors withdrew £1.93bn net, according to the fund network Calastone.
ESG – environment, social and governance – funds saw a sharp reversal as they lost £126m net of cash – the first outflow in three and a half years.
ESG-themed equity funds suffered their first exit in 3.5 years in September
Appetite for funds holding UK equities also continued to decline, with investors withdrawing £694m during the month.
UK-focused funds have now recorded their 16th consecutive month of net outflows – a longer period than for any other major equity fund category.
Aggressive interest rate hikes in the US allowed investors to withdraw a record £497m from US equity-focused funds.
And a sharp slowdown in China’s economy led to a record £116m in net outflows from emerging markets funds and £223m from Asia-Pacific.
The only category to see inflows were specialist sector funds, particularly those focused on infrastructure and renewables, which saw inflows of £91m last month.
Meanwhile, property funds saw significantly higher outflows of £89m, largely due to a ‘collapse’ of investors buying into the sector amid fears over the impact of the impending recession on the market. estate market.
Some UK property funds have recently been forced to limit withdrawals to protect investors from massive outflows, mainly from pension fund investors who have been forced to bolster liquidity amid turbulent markets.
Purchase orders fell to £84million, half the level reached in July and the lowest since March this year, Calastone said.
Edward Glyn, head of global markets at Calastone, said: “The surge in global bond yields is driving a dramatic revaluation of assets of all kinds.
“UK investors are voting with their feet and heading for the exits.
“The interest rate sensitivity of the market for large growth stocks that characterizes the US market explains the record outflows there.
“For emerging markets, the support provided earlier in the year by high metal prices has been negated by the prospect of a global recession.
“The negative effects of the strong dollar for many emerging market economies are being felt in its place. And China’s loss of momentum is draining energy from the Asia-Pacific economic ecosystem.
Overall in the third quarter outflows from equity funds reached £4.70bn, significantly more than in all of 2016, with a total of £6.63bn outflowed since the beginning of the year.