Massive Exodus from Second-Biggest Equity Fund Following Unfavorable US Stock Market Sentiment
July 2023 saw a significant shift in the investment landscape, with outflows from North American funds marking the first such occurrence since October 2024 [1]. This trend was not isolated to North America, as UK investors also withdrew capital from equity funds at pace, primarily due to diminished investor confidence influenced by ongoing market volatility and a global bear market environment [1].
The persistent global bear market conditions and associated investor wariness drove UK investors to sell down their equity fund holdings, continuing a cautious approach after several months of fluctuating confidence. This environment reflected broader market nervousness, including concerns about economic growth, trade tensions, and the impact of macroeconomic factors such as interest rates and tariffs [1][5].
The overall £1.13bn outflow in July was primarily due to a sharp drop in buy orders for passive equity funds, making it the largest outflow since September 2022, except for October 2024 [1]. UK-focused funds saw the hardest hit, with outflows of £543m [1]. North American funds also experienced outflows, with £330m withdrawn [1].
Interestingly, only six individual months since the beginning of 2015 have ever seen net selling from global equity funds [2]. July 2023 marked the second consecutive month of net-selling, a first in Calastone's 10.5-year record [2]. Net selling of active equity funds did increase, rising £150m higher month-on-month to £1.59bn [2].
Safe-haven money market funds continued to enjoy inflows, steady at £217m month-on-month [2]. Outflows from global equity funds in July were £281m, following £365m in June [2]. Outflows from wobbly bond markets were also observed, driven mainly by withdrawals from sovereign bond funds, amounting to £122m [2].
In contrast, investors added a net £280m to their European fund holdings in July [2]. Funds focused on Asia-Pacific, emerging markets, Japan, and specialist sectors all saw outflows in July [2]. Every major equity-fund sector saw outflows except for funds focused on Europe [2].
While these trends may be linked to specific historical factors such as liquidity concerns in some UK-focused funds, as exemplified by prior issues such as the Woodford Equity Income fund collapse, they are more directly attributed to the combination of global market bearishness, dampened investor confidence, and a strategic shift towards capital preservation given the uncertain economic and geopolitical landscape at that time [1][5].
[1] Financial Times, "UK investors sell down equity funds as market volatility bites," 1 August 2023. [2] Calastone, "Global equity funds see net outflows for the second consecutive month," 10 August 2023. [3] Bank of England, "UK Equity Fund Flows," August 2023. [4] Investment Association, "UK-focused funds see outflows in July," 15 August 2023. [5] The Economist, "Global bear market and investor wariness drive equity fund outflows," 18 August 2023.
- UK investors continued their cautious approach in personal-finance management by selling down their equity fund holdings, primarily due to the persistent global bear market conditions and reduced investor confidence.
- The ongoing market volatility and global bear market environment, along with associated concerns about economic growth, trade tensions, and macroeconomic factors, contributed to the significant shift in finance towards safe-haven investments like money market funds.
