UK investors withdraw £642m from retail funds amid market uncertainty
Market uncertainty over the escalating conflict in Ukraine and concerns over soaring inflation prompted UK investors to withdraw millions of pounds from their investment funds in January.
Figures released by the Investment Association (IA) show UK savers withdrew £642m ($585m) from retail funds, the highest level since March 2020.
This compares with inflows of £2.3bn in December and £3.3bn invested in January last year.
AI CEO Chris Cummings said soaring inflation and market uncertainty were “casting a shadow” over the start of the year in the fund market.
“Cautiousness has seen investors opt for diversified funds to help mitigate risk, and strong selling to short-term money market funds has shown that savers are waiting to see how markets develop,” he said. -he declares.
Equity funds were the hardest hit, with outflows of £1.3bn, mainly due to £1.6bn bought in by UK equity funds and £719m sterling by North American equity funds.
This was slightly offset by inflows into global funds, which continue to be the most popular among the AI equity sectors, although net inflows fell from £832m in December to £671m. pounds sterling in January.
Asian funds saw outflows of £13m, while Europe saw outflows of £136m over the same period.
Money market funds were the best-selling asset class in January with an inflow of £820m, which the AI said showed investors are turning to cash-type funds in anticipation repositioning of their portfolios. Most of that investment went into short-term money market funds, with net inflows rising from £557m in December to £838m in January.
Read more: The war in Ukraine will push global inflation up by 3%
One of the best performing sectors was mixed funds, which saw net inflows of £335m, up from £79m last month. Much of that was in mixed investment funds from 40% to 86%, and outflows from mixed equity funds from 20% to 60% slowed from £458m in December to inflows net of £3m in January.
Investors also took money out of fixed income funds, with the sector seeing net outflows of £76m, down from the £153m and £528m invested in December and November 2021 respectively.
Property funds saw outflows of £12m in January 2022, while overall retail funds under management fell from £1.6bn to £1.5bn in January of this year.
Investors are also closely watching Moscow’s invasion of Ukraine as global capital and commodity markets falter.
“Events have evolved rapidly since January and the Russian invasion of Ukraine has prompted a negative market reaction,” Cummings added. “The crisis is deeply tragic for Ukrainian citizens and investors have acted to show their support and quickly complied with the latest sanctions provisions.”
Read more: UK excludes Russian companies from insurance market
Emma Wall, head of investment research and analysis at Hargreaves Lansdown, said market volatility continued to rise and the Ukraine crisis had added to the turmoil.
“Daily market movements are concerning, but trying to trade in times like these invariably leads to excessive losses and capitalizing,” Wall said. “Investors should try to look past these events and focus on their long-term goals.”
Wall warned that while daily market movements are worrisome, “trying to trade in times like these invariably leads to over-trading and capitalizing losses.”
Market volatility has increased since the start of 2022, fueled by rising interest rates, and the recent crisis in Eastern Europe has added to market turmoil as oil prices hit a 10-point high years Thursday.
Brent crude (BZ=F), the global benchmark, rose above $119 a barrel before pulling back slightly, and is now up more than 20% on the week. US light crude (CL=F) rose 2.6% to $113.4 a barrel.
Meanwhile, a report by the National Institute for Economic and Social Research warned on Wednesday that the war in Ukraine could add 3% to global inflation this year and wipe $1tn (£750bn) from GDP worldwide by 2023.
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