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Retail investors withdraw GBP1bn from funds in July

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Laith Khalaf, Senior Analyst, Hargreaves Lansdown has commented on the news from the Investment Association that retail investors withdrew GBP1 billion from investment funds in July. 

He writes that althought the withdrawal was significantly improved on June’s record GBP3.5 billion outflow, it is still high by historical standards. He writes: “For instance during the worst month of the financial crisis GBP780 million was withdrawn from investment funds, though total assets under management have double since then, so in percentage terms last month’s outflows were smaller.”
 
Khalaf comments that combined with June’s huge outflow, the statistics show that the referendum prompted a big exodus from investment funds, both before and after the event. “Over the same period, rising markets have nonetheless propelled total funds under management to a record high of GBP989 billion.”
 
The figures show that both UK and European equity sectors saw bigger withdrawals than in June. Net outflows from UK All Companies funds reached GBP917 million, up from GBP581 million in June. Net outflows from European (excluding UK) funds reached GBP778 million, up slightly from GBP754 million in June. Collectively equity funds from all regions funds saw GBP2.2 billion of net outflows, down from GBP2.8 billion in June.
 
Bond funds enjoyed a big inflow over the month, while GBP1.1 billion poured into fixed interest funds. Targeted absolute return funds also saw net inflows of GBP464 million.
Net outflows from the property sector fell to GBP792 million, down from GBP1.5 billion in June, reflecting the fact that so many funds in the sector have suspended trading.
 
Khalaf says: “In the aftermath of the Brexit vote, investors fled risk and bought safety. The pace of withdrawals moderated from June, largely down to substantial inflows into bond funds and the trading suspension imposed by much of the property sector, which put a lid on redemptions. The irony is that despite large outflows from equities, rising markets have nonetheless propelled total funds under management to a record high of almost a trillion pounds.
 
“There was extremely negative sentiment towards markets in the immediate wake of the referendum, though the continued strong performance of stocks, combined with the Bank of England’s stimulus package, is likely to result in a bit more positivity in August. While large sums have clearly been withdrawn from equity funds, the yields on offer from bonds and cash are pretty crummy right now, and for long term investors the stock market at least gives them a fighting chance of beating inflation.”

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