Some months feel like a drip-drip of bad news for UK fund managers. October was more like someone turning the taps on full.
Shore Capital’s latest look at equity flows shows just how strong the tide has become, with outflows accelerating sharply as investors fled risk assets ahead of the Budget.
UK-domiciled equity funds recorded a fifth straight month of withdrawals, and the scale was eye-catching: £3.6 billion walked out the door in October, almost half the total outflows seen from July to October combined.
That figure includes both active and passive funds, although passives were essentially flat. Active equity funds alone shed £1.7 billion, double the September pace.
The damage was not confined to UK-focused products, although they accounted for a third of the outflows at £1.2 billion. Global funds fared little better, logging their fifth consecutive month of net selling with £911 million out.
The money did not disappear entirely: risk-averse investors parked £955 million in money-market funds, while fixed income attracted £589 million.
The drivers behind the retreat are not hard to decode. ShoreCap highlights three big worries doing the rounds: fears that US tech and global equities may have peaked.
There's also concern that capital gains tax could rise or allowances fall, prompting investors to bank profits while they can; and speculation that the tax-free pension lump sum could be trimmed, encouraging early withdrawals.
The broker suggests much of this should ease once fiscal nerves settle.
Charts tracking the trend paint a stark picture. When the last four monthly datapoints are annualised, flows worsen for both active and passive strategies, with UK-focused funds taking another step down.
The pattern mirrors the wobble in the third quarter of 2024, when pre-Budget jitters also spooked savers.
One side-effect is that cash balances on platform accounts are likely running high, offering a short-term boost to revenues. Whether that cash finds its way back into equities (and into UK funds in particular) will depend on whether the market mood lightens after the fiscal fog lifts.