UK-domiciled funds saw their largest ever monthly net outflow in March, as the Covid-19 pandemic “wreaked havoc” on markets, sparking an unprecedented sell-off.
Excluding money market funds, strategies based in the UK lost around £8.7 billion (€9.9 billion) in redemptions, with fixed income taking the hardest hit, according to the latest data from Morningstar.
While equity funds saw a relatively small outflow, investors withdrew a net £5.5 billion from fixed income.
Within equities, there was a pronounced move from active to passive compared to previous months, the data shows.
Passive vehicles received £3.1 billion of inflows, while their active counterparts saw net redemptions to the tune of just under £4 billion.
Bhavik Parekh, associate analyst, manager research, said: “One of the quickest swings into a bear market in history, driven by coronavirus-related concerns over the global economy, caused investor sentiment to turn sour.”
He added that on a relative basis, March’s net outflow was comparable only to October 2008.
Alternative and asset allocation funds also saw net outflows – but not at historic highs. Morningstar’s report highlighted that, overall, property funds avoided large outflows as many of them had suspended dealing during March.
Market commentator, Adrian Lowcock, head of personal investing at UK investment platform Willis Owen, said the data makes for unpleasant reading – “but should not come as a surprise”.
“Whilst most sell-offs are unexpected, the extent of the change in outlook is rarely so pronounced as this one. Government action is usually taken to support economic activity, not kill it off, but with large parts of the global economy going into lockdown this is effectively what has happened and investors have understandably rushed to react to events,” Lowcock stated.
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