Investors exited UK funds to the tune of £53.9bn in 2022 – the biggest annual outflow on record – according to an analysis by Refinitiv Lipper.
Last year’s outflows, excluding money market funds, were significantly higher than the next highest year – 2019 – which saw redemptions of £11.2bn. In addition, it was the only year over the past 20 to see net redemptions including money market funds.
Money market funds saw the only inflows, at £12.7bn. During the first three quarters, this asset class was in redemption mode, but Q4 saw the tables turn with a vengeance as £53.4bn went into these funds.
Dewi John, Head of UK & Ireland Lipper Research, comments: “Last year was a turbulent and hugely significant period for UK fund markets.
“Record redemptions were clearly driven by a number of factors, including war in Ukraine from February, spiralling rates and inflation throughout the year, and from late September, the effects of a mini-budget that saw institutional funds redeem cash from risk assets and stow it instead in money market funds.”
Equity funds saw the largest outflows, of £34.9bn. UK equities once more bore the brunt of this, with Equity UK, UK Income, and Small & Mid-cap seeing £23.3bn of outflows. By way of comparison, equity fund redemptions in 2007, in the depths of the financial crisis, were £8.3bn.
Alternatives saw outflows of £12bn, with asset-backed security funds being particular victims of these redemptions.
Despite heavy losses, Bond funds experienced relatively small outflows of £2.6bn.
Mixed-assets funds saw outflows of £1.2bn, although GBP Aggressive funds in this asset class continue to attract cash.
Sustainable funds attracted £27.6bn. Of these, equities got the largest share (£21.2bn).
First fall for UK mutual funds and ETFs net assets since 2018
Some £2.01trn was held in UK mutual funds and ETFs at the end of 2022. That’s down from £2.27trn the previous year. This is the first fall in total net assets since 2018, and of greater magnitude.
The largest portion of this (46.1%) is invested in equity funds: £926bn, down from £1.08trn the previous year. Mixed-assets funds follow, with total net assets of £400bn (19.9%), followed by bonds (£322bn).
Percentage-wise, real estate net assets saw the greatest year-on-year decline, down to 79.8% of their 2021 values. The only asset class to see an absolute increase was money market funds, posting a 5.1% increase on the previous year, and now making up 15.1% of total net assets.
Dewi continues: “Some of the net asset declines are because of market falls, with both equities, bonds, alternatives, real estate, and mixed-assets down over the year but a significant factor was investors pulling money from funds.”
