Equity Funds Bleed £18bn in 2023 as Investors Choose Cash

UK
equity
in
particular
have
seen
a
significant
ebb
tide
over
the
past
few
years,
and
2023
provided
little
respite.
The
four
categories

UK
Large-Cap
Equity
has
had
two
months
of
net
inflows
in
two
years,
and

UK
Flex-Cap
Equity
has
only
had
one.

UK
Equity
Income
and

UK
Small-Cap
Equity,
meanwhile, have
had
consistent
outflows.
These
four
categories
account
for
about
$17
billion
(£13.4
billion)
of
the
overall
outflows
in
2023.

Together
with
2022,
UK
equities
have
suffered
outflows
of
£35
billion.

The
outflow
figures
are
significant,
but
equity
remains
the
largest
global
broad
category
by
assets,
at
£646
billion.
Fixed
income,
which
is
the
second
largest
asset
class,
stands
at
£181
billion
in
comparison.
July
proved
the
worst
month
for
funds,
with
a
net
outflow
of
£6.5
billion.

Only
one
broad
category
group
managed
to
attract
net
inflows
in
2023,
and
that
was
money
market
funds.
The
category,
which
is
worth
about
£31
billion
in
total,
saw
£4.1
billion
added
over
the
year.
Even
fixed
income
saw
net
outflows
of
£254
million
in
a
year
where
“bonds
are
back”
has
been
a
common
headline.

In
the
context
of
years
gone,
2023
proved
to
be
a
disappointing
one
for
fund
inflows,
but
aside
from
the
year
2021,
a
year
of
significant
market
activity
and
investing,
investors
have
largely
been
withdrawing
their
money
from
UK
open-ended
funds
since
2018.
Outflows
last
year
still
hold
second
place
against
2019,
which
still
holds
the
title
for
largest
recorded
net
redemptions.
In
the
years
prior,
most
asset
classes
tended
to
attract
investments,
peaking
in
2017
when
net
inflows
surpassed
the
£50
billion
mark.

Beyond
asset
classes,
the
year-end
aggregate
flows
show
a
pronounced
trend
towards
sustainably
labelled
strategies
at
the
expense
of
non-sustainably
labelled
ones.

Just
over
£1
billion
flowed
into
sustainable
strategies
over
the
past
12
months
while
their
counterparts
bled
£26.9
billion
over
the
same
period –
however,
the
inflows
were
more
muted
than
the
previous
few
years.

As
with
sustainable
funds,
we
see
a
similar
trend
among
active
and
passive
strategies,
where
passives
are
gaining
a
larger
foothold.
Over
2023,
investors
added
£21
billion
to
passive
alternatives
like
index
funds
and
withdrew
£46.8
billion
from
active
funds.

The
flow
trends
from
active
to
passive
funds
also
seem
to
have
impacted
the
flows
figures
to
and
from
asset
managers;
those
with
passive
offerings
fared
much
better
than
active-only
houses.
Again,
we
saw
this
in
2022,
too.

BlackRock’s
inflows
were
the
largest,
at
£6.6
billion,
bringing
the
company’s
total
assets
in
UK-domiciled
open-ended
funds
to
£100
billion.
Vanguard
is
second
with
£2.9
billion
added
throughout
the
year,
and
both
Legal
&
General
and
HSBC
follow
close
behind
with
£2.8
billion
and
£2.6
billion,
respectively.

The
largest
redemptions
belong
to
Baillie
Gifford
for
the
second
year
in
a
row,
at
£7.2
billion.
But
Abrdn
has
struggled
with
outflows
this
year,
reaching
£5.2
billion
in
2023.
Only
last
week,
the

fund
house
announced
that
it
plans
to
cut
500
jobs
and
kick
off
a
transformation
programme
to
save
£150
million
by
the
end
of
next
year.
Fidelity
International
had
the
third-largest
outflows,
right
behind
Abrdn,
at
£4.8
billion.

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