Equity Funds See Record £3.64bn Outflows Despite Market Highs
Equity funds experienced a significant downturn in the third quarter, with investors withdrawing a record £3.64bn despite leading share indices reaching market highs. This unusual trend, noted by Edward Glyn of Calastone, was driven by negative sentiment towards the UK economy's fiscal position and lack of growth.
In September alone, £1.20bn was withdrawn, bringing year-to-date inflows close to zero. All major equity-fund sectors, except European-focused funds, faced outflows in the quarter. Glyn also warned about potential irrational bubbles in certain parts of the US market, particularly those tied to the AI boom. Neil Wilson of Saxo UK suggested that market highs are being driven by limited momentum rather than fundamentals. UK funds saw the worst performance, with £692m withdrawn over the quarter.
The record highs in indices like the FTSE 100, Dax, and S&P 500 contrast sharply with the mass withdrawal of funds from equity funds. This unusual situation, where investors are pulling out while markets are high, suggests a cautious approach from investors towards the current world market conditions.
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