Equity funds were hit hard during the last week of February, as investors flooded to withdraw their cash amidst ongoing news of the economic impact of the coronavirus.
Although investors bought equity funds “enthusiastically” in the first three weeks of the month, when markets began their worst week in over a decade on February 24, they withdrew capital at an unprecedented rate, according to the latest fund flow data from Calastone.
In the last five days of February alone, outflows from equities reached £1.55 billion (€1.78 billion). It was the fastest rate of redemptions from the asset class on the fund transaction network’s records.
Edward Glyn, the firm’s head of global markets, said: “Fear ate greed for lunch in the last few days of February, as equity funds saw outflows at their most ferocious in five years. After an initial flurry of outflows in January, funds benefited from extreme complacency over the coronavirus outbreak.”
“But the news that the epidemic had taken hold in Italy and then quickly spread across the world caused a dramatic reassessment of its potential impact on the global economy. Investors have voted with their feet.”
The impact was felt most strongly on active equity funds which saw outflows to the tune of £1.18 billion in February, while passive funds enjoyed £832 million of inflows.
Passive funds did see outflows in the last week of February, as the economic impact of the virus spread, but these were limited to only £25 million.
Institutional investors were more reactionary than retail investors, the research also found. Through the course of February, institutions were overall net sellers of equities, while retail investors were “modest” net buyers.
Glyn added: “It’s impossible to predict what will happen next, or whether the market has over- or underreacted to the epidemic.”
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