Equity fund exodus as market highs ‘running on fumes’
Equity fund outflows hit a fresh record in the third quarter despite leading share indices reaching market highs, fresh data has revealed.
Investors pulled £3.64bn from equity funds in the three months to the end of September, according to figures compiled by global funds network Calastone, representing the worst three-month outflow on record.
That included £1.20bn withdrawn in the month of September alone, leaving year-to-date inflows close to zero and with all major equity-fund sectors except European-focused funds experiencing outflows.
UK funds were among the worst performing, shedding £692m over the quarter, the data found.
Edward Glyn, head of global markets at Calastone, said: “The seemingly unstoppable trend of outflows from UK-focused funds in recent years has been accompanied by strong inflows to equity funds overall, at least until recently.
“The doom loop of negative commentary on the UK economy with its dire fiscal position, soaring credit spreads, lack of growth and impending tax rises may now be winning out. Outflows are on the rise again.”
Signs of a bubble?
The equity exodus comes despite a host of stock indices reaching fresh records in recent months.
The UK’s FTSE 100 index is up by more than 15 per cent since the start of the year, while the German Dax has risen more than 20 per cent and the US S&P 500 is up by 15 per cent.
Neil Wilson, Saxo UK investor strategist, said the exodus “suggests the record highs are running on fumes.”
Glyn said: “It is really unusual to see markets reaching record highs while investors are moving decisively for the exits across such a broad range of funds.”
“Some parts of the US market in particular do seem to be exhibiting signs of irrational bubble behaviour, particularly those perceived to benefit from the AI boom. It’s tempting to bet against the market when these signs appear.”