Fresh data from the Investment Association showed UK gross fund flows fell 2% year-on-year in July, marking a further slowdown after June, with analysts noting that this does not bode well for asset-gathering firms.
The deterioration was led by a 33% drop in flows from non-UK intermediaries and a 3% decline from UK intermediaries, partly offset by a 10% rise via fund platforms.
Net outflows from UK-focused equity funds totalled £0.7 billion in the month, or 0.4% of opening assets under management, with £7.1 billion withdrawn in the year to date, 4.0% of opening AuM or 6.8% annualised.
Analysts at Deutsche Bank said its proprietary analysis suggested net outflows continued in August, with early indications at around -£1.4 billion.
"We think these persistent outflows mean many asset managers managing such funds are very much on the back foot – typically more concerned with managing the outflows / maintaining adequate associated liquidity / deciding what stocks to sell / how to keep the portfolio in balance, rather than more proactively thinking about what to buy."
UBS analysts cautioned that the weak July figures do not provide a positive read-across for expectations at St James's Place PLC (LSE:STJ), where consensus is for third-quarter gross flows to rise 16%.
July is seasonally quiet, though SJP has said advisers were working hard over the period.
Looking ahead, UBS expects UK asset gatherers like SJP to remain sensitive to macro headlines in the run-up to the Autumn Budget, with potential tax rises shaping investor behaviour.
“The macro environment will matter more than business model specifics,” UBS said.
The Deutsche analysts pointed out that the UK equity mutual fund sector has faced "meaningful" net outflow and performance pressures since 2016, with IA data showing £69 billion of net outflows, or 29% of opening AuM, in that period.