All asset classes record outflows for the first time since 2019

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Investors withdrew £4.3bn of funds in May, the highest outflow since £7.5bn in March 2020, as inflation, interest rates and a worsening economic outlook wreaked havoc on the markets, according to Morningstar UK’s latest fund feeds.

Active equity funds suffered the most, accounting for four-fifths of the month’s net redemptions at £3.4bn. UK large caps, Europe ex-UK and global large cap growth saw the highest withdrawals, with passive and active funds seeing investor outflows.

The outflows followed the persistently poor short-term performance of quality and growth-oriented funds. For the top 15 active equity strategies with the highest net redemptions, the majority had a growth style bias, either outright or at least relative to their respective benchmarks.

Morningstar: European equity funds return to positive territory in April

Although it has benefited from inflows in recent years, May saw outflows for allocation strategies for only the second time in as many years. Sustainable funds in this area have generally fueled inflows, but contributed just £121m last month.

Bond funds fared slightly better than equity vehicles, but also saw outflows in May as part of broader investor risk aversion activity. GBP corporate bonds saw their largest monthly outflows since January 2015, but the equivalent short-term category received inflows of £271m.

Aviva, Blackrock and Baillie Gifford each saw outflows of £1billion or more, while the market’s biggest fund – Fundsmith Equity – recorded its biggest monthly outflow of £622million after its worst start to trading. year since its launch.

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