UK investment fund launches plunge to 20-year low as investors turn to cash
The number of new UK investment funds has reached its lowest level in two decades, according to new data, as asset managers are squeezed by rising interest rates and the cost of living.
Figures from US financial services firm Morningstar, first reported by the Financial Times, showed 397 UK funds were launched in 2023, down a quarter from the year before and the lowest since the aftermath of the dotcom crash in 2003.
The number is also less than half of a recent peak of 899 in 2010.
UK investors have been lured away from funds as 15-year interest rates offer high returns from cash products, with volatile capital markets also putting pressure on asset managers.
“The regime shift in inflation and rates is impacting how investors think about their portfolios, with many clearly allocating to cash investments as a result,” Doug Abbott, head of wealth UK client group at Schroders, told the FT.
Rising inflation and the cost of living crisis have led retail investors to increasingly take money out of funds in recent years.
British investment firms were hit by the worst year of outflows on record in 2022, according to the FT, as a net £50bn was redeemed from funds.
Data from the Investment Association showed retail and institutional investors pulled £37bn from funds in the 10 months to October 2023.
Asset mangers have been further squeezed by falling fees and high regulatory costs, with several big names looking to cut spending.
Abrdn’s chief executive, Stephen Bird, reportedly wanted to sell the company’s troubled investment management division last June, with the firm also said to have hired Boston Consulting Group to help cut a further £200m in costs.