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Coronavirus crash prompts record flood of fund outflows in the last five days of February

Fund Flow Index - March 2020

The market crash caused by a dramatic reassessment of the potential economic impact of the coronavirus prompted a flood of outflows from equity funds in February. The apparently modest £348m net outflow for February belied the extent of the reversal in investor sentiment, however. Investors bought equity funds enthusiastically in the first three weeks of February, having shrugged off an initial flutter of virus-induced nerves at the end of January. But when, on Monday 24th February, the markets began their worst week in over a decade as the virus took hold in one country after another, investors withdrew their capital from equity funds at their fastest rate on Calastone’s record: in the last week of February alone they sold an unprecedented net £1.55bn of equity holdings. Calastone’s FFI: Equity dropped to 49.1 for the full month, but in the last week was just 37.7, its lowest ever reading.

Key highlights from this month's FFI:

  • Equity funds hit by £1.55bn of outflows in the last week of February as markets crashed
  • Active equity funds bore the brunt of the selling – suffering 98% of the outflows in the last five days
  • Passive funds only suffered minor outflows in the last week of February
  • Global funds were hit hardest, suffering record outflows. Asia, Europe, specialist regional and sector funds were also impacted
  • UK equity funds escaped almost unscathed until the last day of the month
  • Across all fund types in all asset classes, February 2020 was the worst month since October 2016, and only the fourth month on record to see overall outflows as investors sought the safety of cash