Retail investors continue to exit UK equities

Brexit appears to be impacting retail sales of UK equities

Retail investors ditched cash and UK equities in July but piled into global equities and fixed income, making it the best-selling July on record, according to stats from the Investment Association.

The figures showed £3.5bn of net retail sales, the most the month has ever seen with all asset classes seeing positive retail inflows except Money Markets.

Surprisingly, fixed income was the best-selling asset class in July 2017, with net retail sales of £1bn, Mixed Asset was the second best-selling with net retail sales of £958m, followed by equities with £924m of net retail sales.

The best-selling IA sector was Global with sales of £607m, while the Sterling Corporate Bond sector was second with £432m, jumping from seventh place the previous month.

Europe exc UK was also popular as investors’ nerves about elections across the region dissipated – it achieved net retail sales of £285m in July.

UK retail sales fell £12.1bn in 2016 as investors flee equities

Retail investors continued to exit UK equities on fears over Brexit and the domestic economy with the UK All Companies sector experiencing outflows of £214m.

Chris Cummings, chief executive of the Investment Association, comments: “The UK asset management industry continues to thrive in 2017 as July marked 12 consecutive months of positive retail inflows.”

Alastair Wainwright, fund market specialist, added: ” Net retail sales in July were £3.bn, making this the highest July net retail inflow on record. So far this year, retail clients have invested £23.1bn in UK authorised funds, already surpassing annual net retail sales in both 2015 (£16.9bn) and 2016 (£6.8bn).

“There were positive retail inflows across all asset classes except Money Markets, which saw its first monthly outflow since January 2016. Fixed income funds proved to be most popular with a net retail inflow of £1bn. [The] Sterling Corporate Bond was the second best-selling sector with £432m of net retail sales.

£958m for Mixed Asset funds

“Mixed Asset funds attracted £958m of net retail money in July with flows being more or less equally positive across all Mixed Asset Sectors. There have only been three monthly outflows from the asset class in the last five years. Mixed Asset products were also most popular within the passive space with £212m of net retail investments.”

Tracker funds overall saw £55m of net retail inflows, with funds under management there reaching £155bn as at July 2017. Their overall share of industry funds under management was 13.7%, compared with 12.7% in July 2016.

Mark Dampier, head of investment research, Hargreaves Lansdown, commented on investors exit from UK equities:  “It is not surprising that the UK does not focus well given the relentless negative press coverage on Brexit.

“We saw a similar reaction to Europe in 2012 when everyone was worried about the Greek debt pile and the prospect of a Grexit. Yet back then it was a great buying opportunity, but only in the last few months has Europe become popular again.

“Too many investors write off their home market, perhaps because they are so close to it. Time and time again I meet UK fund managers who see great UK companies across the cap spectrum. While it is important to diversify, I believe investors should more closely at the UK. Unfashionable regions are always worth a closer look at and for the majority of investors the UK should form the core of their portfolios.”

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