Calastone: retail investors withdraw £2.7 billion from UK property funds in last 12 months

Investors have withdrawn £2.7 billion in net outflows in the 12 months to the end of September, according to fund transaction network Calastone, as a flight from risk assets among retail investors continues to accelerate in the lead up to the UK’s 31 October Brexit deadline.

Calastone’s index revealed complementary trends across all asset classes.

A flight from risk saw continued inflows to fixed income and money market funds, a record 12th consecutive monthly outflow in September from property funds, the worst ever outflows from high-risk absolute return funds, an unprecedented fifth consecutive quarter of outflows from commodity funds, and even a sharp drop in inflows mixed asset funds, which normally see much more stability than other categories.

September marked the 12th consecutive month of net outflows from domestic investors in UK real estate funds, according to Calastone. It follows of the Financial Conduct Authority’s publication of new rules for funds that trade in illiquid assets, like property.

The FCA’s new rules, which will come into effect on 30 September 2020, place additional obligations on the managers of funds investing in inherently illiquid assets to maintain plans to manage liquidity risk. The rules also aim to reduce the potential for some investors to gain at the expense of others, and reduce the likelihood of runs on funds leading to ‘fire sale’ of assets which disadvantage fund investors.

In uncertain times, retail investors prefer to spread their risk more broadly, rather than attempt to pick a winning region and asset classes.

Edward Glyn, head of global markets at Calastone said:

“The particular distaste for UK assets, however, is a very clear response to the ever-intensifying political crisis, especially now that it is accompanied by clear evidence of economic damage too. More widely, the absence of risk appetite by UK investors has been really stark in Q3. Asset classes associated with greater stability are benefitting from investor nerves. The picture improved a little in September, but it’s too soon to call time on investor fear.”

james.wallace@realassetmedia.com