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UK large-cap funds, which focus on FTSE 100 companies, experienced significant outflows as investors withdrew over £2 billion in June. This trend contributed to mounting losses concentrated among a select few asset managers.
An analysis by Morningstar, which reviewed all UK-domiciled open-ended funds, revealed that approximately £3 billion was withdrawn from these funds during the month, raising the total outflows to £17.4 billion since the beginning of the year.
Investors pulled £2.2 billion from the £77 billion UK large-cap equity funds in June alone, resulting in a total loss of £6.2 billion for the year so far.
Other fund categories that suffered included Sterling Corporate Bond funds (-£1.2 billion), Sterling Flexible Allocation funds (-£779 million), and Global Large Cap Growth Equity funds (-£607 million).
Which Fund Managers Are Losing Capital?
Two main categories of asset managers are experiencing these outflows: those focused on bonds and Scottish fund houses.
UK Fund Houses Facing Withdrawals
While sustainably labeled funds saw fewer outflows compared to their mainstream counterparts, ESG-focused asset managers still faced significant withdrawals. Royal London experienced a £483 million loss, and M&G saw £234 million pulled out in June.
This is largely because both of these fund houses also have a significant focus on bond funds, which experienced substantial outflows of £1.9 billion during the month.
Notably, two of the top four funds for outflows were bond funds. Aviva’s Corporate Bond fund and Schroders’ Multi-Manager Global Investment Grade Bond fund each lost around £800 million.
On the Scottish front, Baillie Gifford and Abrdn were the hardest hit, with £659 million and £227 million, respectively, withdrawn in June. Since the start of 2024, Baillie Gifford has seen a staggering £4.8 billion pulled by UK investors, while Abrdn has lost £708 million.
American Giants Buck the Trend
Despite these negative flows, American fund giants have continued to attract inflows, achieving considerable success with £522 million and £371 million, respectively, from UK retail investors during the month.
This success is largely attributed to the continued popularity of index funds, which brought in £2.5 billion throughout June.
HSBC and Fidelity International also benefited from the enduring appeal of passive funds, with inflows of £501 million and £253 million, respectively, maintaining positive year-to-date flows.
Giovanni Cafaro, an analyst at Morningstar, noted that the trend of outflows from UK equities has persisted since early 2020.
The total assets in UK equity funds peaked at £280 billion in 2017 but have since declined to about £200 billion.
“Within the broader UK-domiciled equity fund universe, some of the main beneficiaries of this reallocation, to an extent, have been global, US, and emerging markets equity as well as sector funds, including ecology, infrastructure, and healthcare,” Cafaro explained.
Cafaro added that the driving forces behind these outflows include the relative market performance and its sector composition, particularly the lower exposure to technology stocks compared to US and global indices.
