UK funds industry badly impacted with No Deal Brexit in sight

Credit: This story was first seen on Funds Europe.

Due to BREXIT uncertainty, especially in July when a governement leadership race took place when talk of a no-deal Brexit increased, billions of pounds left UK-domiciled funds, transferring into offshore funds, mainly in Ireland and Luxembourg.

According to Funds Europe, Calastone “blamed an increase in the rhetoric around a no-deal Brexit”.

Calastone calculated the figures based on “millions of predominantly UK retail investor decisions that pass through its transaction network”.

Fund flow figures also showed dramatic outflows generally from equity funds, with a drift towards passive funds. In current market conditions, active funds are now the “big losers”.

In spring, when MPs voted to rule out a no-deal withdrawal from the EU, investors had been adding to their UK equity and holdings. However, with a no-deal now “[…] “considered by many to be official government policy”, there was a flood of withdrawals from UK-focused funds, including the equity income sector, which is dominated by funds investing in UK equities and which saw £333 million of outflows.

Edward Glyn, Calastone’s head of global markets, said: “In periods when an orderly exit has looked ever more likely, investors have bought undervalued UK-equity funds. But they pass judgement swiftly when the no-deal rhetoric ramps up.” […]”

Should investor sentiment turn negative, trends indicate that active funds are ever more likely to shoulder more of the outflow burden.

 

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