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UK’s September turmoil sparks flight from UK equity funds as outflows hit second-worst month on record

Fund Flow Index - October 2021

Funds focused on UK equities suffered heavy selling from investors spooked by the multiple crises afflicting the UK in September. Investors sold down a net £567m during the month, the second-worst month for UK equity funds on the Calastone FFI’s seven-year record. September stood out because investors clearly singled out UK-focused equity funds. This contrasted with the situation in June 2020, the worst month on record, as investors at that time sold heavily across almost all equity categories in order to take profits after the sharp increase in global markets sparked by huge stimulus from central banks.

Key highlights from this month's FFI:

  • Investors singled out UK-focused equity funds for near-record selling in September
  • Active UK equity funds bore the brunt of the selling – investors are more prone to switching active funds rather than passive
  • Bearishness on the UK dragged overall inflows to the lowest level since January
  • Investors did not sell their ESG UK equity funds – the selling affected non-ESG UK funds
  • Most other geographical categories saw inflows, including record buying for emerging markets
  • Rising bond yields dampened enthusiasm for fixed income funds