November net outflows from UK-focused funds hit record

In November, investors pulled a net 1.02 billion from UK-focused funds, making it the second worst month on record, according to a study.

According to Calastone, the fund flows data provider said that they were shunning the UK because of the fact that the recession may last longer than elsewhere.

A net 9.8 billion has been pulled from UK-focused funds in the past 18 months, and November's outflow has only been exceeded once before, in June 2022, it said.

There are fears over the potential duration of the UK's recession rather than hopes for inflation abating, which is dominating investor concerns for UK assets, said Edward Glyn, head of global markets. Despite low valuations, you can barely give them away at the moment. The Investment Association reported last week that net outflows from UK funds had 792 million in October, which was a result of Calastone s data.

The Bank of England and Office for Budget Responsibility believe that the UK will only come out of a recession in the third quarter of 2022 and will come out of it at the end of next year.

In November, investors piled into global bond funds with a net 1.09 billion invested in UK-focused funds, while UK-focused funds were shunned. This was the largest monthly inflow in two years and fourth highest on record.

Bond yields slumped in the month as investors scented a turning point in the interest rate cycle, with hopes that the US Federal Reserve would curb inflation and so could stop raising rates sooner or by smaller amounts.

Glyn said optimism fed into a first net inflow into equity funds for seven months. The trajectory of US rates was a key driver of global markets.

The investor gloom about the UK does not seem to have fed through share price movements. The FTSE 100 is up by just over 10 per cent from the low of October 12, matching the S&P 500. The more UK-focused FTSE 250 is up 14 per cent, while the more UK-focused FTSE 250 is up by 14 per cent. The Euro Stoxx 50, which tracks blue-chips in the eurozone, is up 18 per cent.

Calastone connects fund managers with institutional investors, processing 250 billion of flows each month.