UK funds experienced continued outflows, a trend that started in 2022, totalling £77bn in redemptions from UK-domiciled funds, according to data.
According to Morningstar’s latest UK Asset Flow report for June 2024, the trend of ongoing outflows from UK funds began in 2022. In June alone, UK large cap equity funds saw over £2bn in outflows, contributing to this staggering figure.
Fixed-income strategies experienced the most outflows among various asset classes in June. The findings have also revealed a noticeable divergence between active and passive fund flows continued, with passive funds enjoying net inflows while active strategies suffered further redemptions. Sustainably labelled funds, however, fared better, enduring fewer outflows compared to their mainstream counterparts.
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BlackRock and HSBC stood out positively, recording nearly £1 billion in combined monthly inflows. According to the data, the overall preference for passive funds favoured fund groups with strong passive offerings. Global and US equity strategies topped the inflow rankings, highlighting a shift in investor preferences.
In contrast, UK equity strategies continued to struggle, with three UK equity funds among those experiencing the heaviest outflows. Giovanni Cafaro, a Morningstar analyst and author of the report, commented: “Outflows from UK equity funds have been persistent since early 2020, with sectors’ aggregate assets under management falling from a peak of £280bn in 2017 to around £200bn in 2024.”
Cafaro noted that global, US, and emerging markets equity funds, as well as sector funds like ecology, infrastructure and healthcare, have benefited from this reallocation. He attributed the outflows to the relative market performance and sector composition, with UK indices having lower exposure to technology names compared to US and global indices. Despite these challenges, Cafaro emphasizsd that UK stocks still present compelling valuations for value-oriented investors, making a strong case for investment in the space.
