UK fund outflows hit record £11bn in September

Morningstar has reported that outflows from UK-domiciled funds hit a new record in September as investors withdrew £11.25 billion – the biggest outflow in 10 years.

Equity funds accounted for £8 billion of the total.

“With the latest outflows, the broad equity category has now seen redemptions of over £25 billion over the past 12 months,” said the Morningstar report.

“And the category wasn’t the only one unpopular with investors.

“Every single group saw outflows in September, even fixed income (£659 million), which has been the most popular … and allocation (£1 billion), which was an investor favourite over the pandemic.

“This is the first time all mainstream asset classes have had outflows in unison.”

In equities, US large-cap blend was the least popular category, with £1.60 billion in net redemptions.

This was followed by UK large-caps, at £1.59 billion in net redemptions, and the two had the biggest outflows of any Morningstar category.

Actively-managed strategies saw £9.9 billion of net outflows across all asset classes.

The report said: “When looking at the largest net flows over the past 12 months, growth equity strategies dominated the outflows overall: with the latest numbers taken into account, Baillie Gifford Diversified Growth’s net outflows hit £1.87 billion, and Fundsmith Equity hit 1.66 billion.”

Morningstar research analyst Jack Fletcher-Price said: “We believe there may have been months in 2008 which saw this level of relative outflows.

“As an absolute figure, it is more likely this is the largest outflow to date, as the UK Open-Ended total AUM has grown significantly since 2008 …

“We might expect fund flows in October to better reflect investors’ appetite.

“Despite the possibility of another leg of market falls, we are starting to see more attractive valuations in parts of equities and fixed income.

“Trying to time an entry point is futile, but this margin of safety is opening up long-term opportunities.”