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Investors pull £463m from funds in turbulent January

Investors last month withdrew the biggest amount of money from funds since the 2008 financial crisis, new figures show.

 
Investors pull £463m from funds in turbulent January

Investors last month withdrew the biggest amount of money from funds since the 2008 financial crisis, new figures show.

According to the Investment Association (IA) UK fund managers saw net retail outflows of £463 million in January as private investors pulled out more cash than they put into stock market funds. It was the biggest outflow since October 2008 when the credit crunch was at its height.

This was in sharp contrast to December when funds enjoyed net inflows of £1.9 billion and a year ago when new investments exceeded withdrawals by £401 million.

All types of investment fund were affected by the exodus which occurred as stock markets suffered their worst New Year in years.

A total of £267 million was withdrawn from bond funds as investors responded to the rise in US interest rates in December and turmoil in the high yield or 'junk' bonds market.

Figures from Morningstar show the giant M&G Optimal Income fund, managed by bond fund manager Richard Woolnough, suffered the most outflows with £864 million walking out the door to leave it with £15.5 billion.

Unusually, 'mixed asset' funds which invest in a broad range of shares, bonds and other asset classes were hit too, with redemptions exceeding new investments by £157 million. This was the first time in over a year the sector suffered net outflows, said the IA.

However, that didn't stop the Standard Life GARS mega fund taking in another £304 million, bringing its assets to £26.5 billion, according to Morningstar.

Commercial property funds were out of favour with the sector shrinking by £27 million. Ewan Lovett-Turner of Numis Securities said the cooling off towards real estate had been evident in the past nine months with shares in commercial property investment trusts moving from big premiums above net asset value to discounts below NAV. 

There was a mixed picture in equity funds, where an overall net reduction of £58 million masked a divergence among the sectors. UK All Companies funds were generally shunned with a total of £273 million withdrawn in January. Asia and Emerging Markets funds were also out of favour, shedding £200 million and £42 million respectively.  

By contrast, the hot sectors were Europe ex-UK with net retail sales of £250 million, followed by North America and Targeted Absolute Return funds, which took £228 million and £226 million respectively.

UK Equity Income funds attracted £142 million once redemptions are netted off new investments. Neil Woodford's Woodford Equity Income fund alone took in £143 million.

Cheap, index-tracking funds continued to be popular and pulled in more than £500 million, despite the plunge in indices like the FTSE All Share. The most popular was the Royal London FTSE 350 Tracker fund,  which took in a net £167 million last month

'Risk-on, risk-off was the theme in financial markets during January, which led to increased volatility,' said IA interim chief executive Guy Sears. 'Unsurprisingly, this caused some investors to reduce their holdings in investment funds.'

Laith Khalaf, senior analyst at Hargreaves Lansdown, the funds supermarket, said it was too early to say if turbulent markets had panicked investors into selling. 'We shouldn't read too much into one month's figures, particularly when tax bills have to be paid and money is thin on the ground after the annual Christmas splurge.'

He suggested that investors who were worried by the state of markets could set up a monthly savings plan which would smooth out the ups and downs.

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