War in the Middle East deterred investors in June but did not cause panic. According to the latest Fund Flow Index from funds network Calastone, equity funds saw outflows of £98m during the month (inflow of £525m in May), while bond funds saw inflows fall to £195m (£328m in May) and safe-haven money markets saw inflows rise to £218m (£85m in May).
The outflow from equity funds was not driven by an increase in selling: the value of sell orders actually fell during the month, down by 2.5% to £11.4bn. It was instead caused by a buyers’ strike: the value of buy orders fell 7.5% to £11.3bn, their lowest level since September 2023.
Edward Glyn, head of global markets at Calastone said: “June was characterised by caution, not fear. A net outflow from equity funds as an asset class is relatively rare as we have a structural bias towards adding to our savings – just one month in five over the last 10 years has ever seen investors withdraw capital – so any outflow is noteworthy. But it was modest in June – a £98m withdrawal is vanishingly small in the context of £22.7bn of total transactions.
On the one hand investors were naturally worried by the outbreak of a war with unpredictable consequences and on the other they were reassured by global stock indices being relatively unmoved. They dropped a little at first before ending June ahead, while bond markets rallied throughout the month. Investors weighed the uncertainty, but did not panic.”
UK-focused and global funds fared worst. June’s £594m net outflow from funds investing in UK equities is part of a long-term structural trend of monthly selling by UK investors. The £365m outflow from global equity funds is much more unusual – the first time net selling has occurred since the Liz Truss’ mini-budget in September 2022, and only the fifth month on Calastone’s more than ten-year record.
By contrast, European equity funds benefited from £301m of inflows in June, while North American ones saw net buying of £306m. North American inflows were up month-on-month (May £115m) but down sharply from March and April which between them saw inflows of £3.3bn.
