UK investors withdrew £25.7 billion from funds in 2022, the first annual outflow recorded by the Investment Association (IA).
Investors took £282 million out of funds in December 2022, in the 10th month of net retail outflows of 2022, according to the latest data published by the Investment Association.
“This takes total retail outflows for 2022 to £25.7 billion,” said the IA.
“This is the first time that an annual outflow has been recorded, with the next lowest sales total coming in 2008 during the global financial crisis at £4.2 billion.”
Over 2022, responsible funds bucked the trend of outflows, seeing £5.4 billion inflows throughout the year and tracker funds also saw annual inflows of £11 billion.
Investment Association CEO Chris Cummings said: “December was a quiet month for investor activity, and funds closed out the year on a modest outflow.
“Despite outflows easing across equity funds, investors continued to take money out of UK equities, against the backdrop of the challenging economic forecast for the UK.
“UK retail investors faced a challenging year in 2022, as inflation soared following the Russian invasion of Ukraine, which caused energy and supply shocks.
“Investors grappled with a cost-of-living crisis and returns from stocks and bonds falling in tandem. Funds saw outflows in 10 months out of 12 last year, with £25.7 billion withdrawn through the year, a record annual outflow.
“As the December data shows, the significant outflows we saw earlier in the year are easing.
“With markets rebounding at the start of 2023 and the outlook for bond investing improving, there are glimmers of hope that investor confidence will increase in the first quarter of 2023.”
The IA represents fund firms that manage over £10 trillion of assets on behalf of their clients in the UK and around the world — about 12% of the £83 trillion global assets under management.
Emma Wall, Head of Investment Analysis and Research, Hargreaves Lansdown, said: “It is no surprise to see investors turned off markets in 2022, a year of extreme economic and political turmoil. But the scale of the outflows is eye-watering. Outflows of more than £25bn illustrate the wall of fear investors had to climb to see through the news headlines last year.
“It wasn’t just the atrocities in Ukraine, but the associated inflation and rising cost of living, the disastrous mini-budget from the short-lived Liz Truss prime ministerial leadership, and the lingering spectre of coronavirus which weighed heavily on investors’ minds – and trading.
“2023 has got off to a more optimistic start, with the FTSE 100 flirting with record highs, and the US market being led by better-than-expected results from a number of the tech giants, and falling inflation.
“HL clients have responded to the rally by buying into global equity funds – though more cautious money market and total return funds also hit the top 20 for January.
“Perhaps those investors recognise we’re not out of the woods yet, and know to expect more volatility through the year, as markets digest jobs figures, inflation outlook, central bank policy – and the ongoing war in Eastern Europe.”