Refinitiv: Equity Funds See Almost £7bn Outflows In June

Gross redemptions were £10.5bn in June, with equities accounting for £6.9bn of withdrawals. Of that figure, outflows of £2.8bn were from mutual funds, with ETFs losing £29m. 

Last month, there were £1.3bn in net passive inflows compared to £9.3bn in net active outflows. Passive fixed income funds won over equities, with bond mutual funds receiving £1.4bn and ETFs, £939m.

Global ETF flows halve in June

Mixed asset funds experienced outflows of £1bn, having garnered £1.8bn inflows last May. Dewi John, head of Lipper UKI research, said that mixed asset flows have been resilient of late, likely from retail investors "deploying cash squirrelled away over COVID".

"If this reversal is sustained, it may be an indication of changing sentiment, as investors accommodate rising costs and tightening belts," he said. 

When it comes to alternative investments, a fund that replicates index-linked gilts accounted for the majority of inflows, while more than £1.5bn was withdrawn from alternative funds investing in ABS.

GBP bonds and real estate see inflows

The top five classifications in June were all bonds, totalling £2.5bn, with Bond GBP Government topping the chart this month at £660m worth of inflows. 

Bond Emerging Markets Global LC was the next contender with £641m in net subscriptions. While their hard currency peers have seen slight outflows, John said that yields are looking attractive as local currency debt, by definition, does not have the same vulnerability to rising US rates as hard currency does.

With £402m inflows, bonds were the top selling ESG asset class, while its conventional peers shed £421m. Despite the challenging market backdrop, ESG equity sales remain in the black, at £38m.

WisdomTree: Thematic fund flows slow in H1 2022

Despite property being out of favour for years, the inflation linkage to rents makes the asset class more attractive in this environment, John said. Real Estate UK saw £209m in inflows and Equity Sector Real Estate Global attracted £165m of fresh capital.

"However, if we do go into recession in H2, things will play out differently. Commercial property values are closely linked to net operating income, gross rental income and expenses. Recessions see occupancy rates decline and late payments increase," he said. 

"Overall, this looks like a market that is positioning for stagnating growth, if not outright recession, more than for inflation—though there are still elements of the latter."

Flows by global classification

The FTSE 100 fell by 5.75% over the month, but still managed to outperform the S&P 400, which fell 8.4%. Despite this, UK equities saw the largest outflows out of any category, at more than £2bn. 

Refinitiv data showed that there is a broad withdrawal of assets from equity markets. Equity Asia Pacific ex Japan shed £1.1bn, Equity Emerging Markets Global lost £670m and the previously perennial favourite, Equity Global, experienced withdrawals of £1bn.

Morningstar figures reveal drop in recently ESG rebranded funds flows

"The £893m redemptions for Bond GBP Short Term militate against a market that's full throttle on protecting itself against the ravages of inflation, although it is a very uneven picture," said John.

Insight and BlackRock were the top-selling asset managers, with inflows of £954m and £835m, respectively. DWS was also one of the month's top-selling firms, with £465m inflows. 

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