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Assets in the UK fund industry have fallen by nearly a fifth over the past 12 months, with senior executives and research analysts blaming heightened investor uncertainty ahead of Britain’s referendum on EU membership.
Next week’s vote has caused global market upheaval, pushing investors to safer assets and sending the UK currency and stocks to their lowest levels in months. The FTSE 100 is down more than 3.5 per cent over the past three months.
According to Lipper, the research company, assets in the UK’s asset management industry have fallen by nearly £200bn to £900bn during the past year, as a result of the concern about a British exit from the EU, or “Brexit”.
Flows to UK funds have been negative for all but one of the past nine months, the figures showed. The expectation is that outflows will have accelerated in June as uncertainty over the outcome of the vote intensifies.
The Financial Times poll of polls indicates 47 per cent of voters back Brexit, and 44 per cent Remain.
The worst-affected funds are those focused on the UK stock market. These funds have experienced just one positive month of flows during the past year. Strategic bond funds have also fared badly, posting outflows for each of the past 12 months.
The chief executive of a large asset management company, who asked to remain anonymous, said his business has experienced outflows from UK clients as a result of the impending referendum.
He said: “The call for a referendum was a mistake from the outset, in my opinion, and was always going to be negative for fund sales.
“The closer we get to a vote and the harder it has become to call the outcome of that vote, the more we have seen money flow out of funds.”
A Bank of America Merrill Lynch survey of 213 fund managers, released this week, showed international investors have increased their cash holdings to the highest level since 2001. This indicates fund managers have bolstered portfolios against risk in the run-up to the vote.
Desperation among UK investors to protect their assets from Brexit-related risks has been highlighted by their allocations to targeted absolute return funds, which aim to provide positive returns in any economic climate, according to Lipper.
These funds have attracted nearly £10bn during the past 12 months, despite posting negative returns (-0.6 per cent) over the same period.
Jake Moeller, head of UK and Ireland research at Lipper, said: “UK investors have been moving out of equities and into targeted absolute return. It certainly paints a picture of concern about what is going on [with the referendum].
“A lot of fund groups have been suffering outflows.”