By Elizabeth Howcroft
LONDON, Feb 7 (Reuters) - UK-focused equity funds
registered 868 million pounds ($1.04 billion) of outflows in
January, in sharp contrast to global funds, which attracted
investment as markets rebounded, funds network Calastone said on
Tuesday.
The latest data means UK equity funds have seen 20
consecutive months of outflows, with January's losses the
third-largest on record.
London's FTSE 100 hit a record high on Friday, having gained
about 4.3% in January.
"The combination of January’s near-record high for the UK
market, with near-record outflows smacks of opportunistic
selling against a backdrop of chronic pessimism, exploiting a
moment of higher prices to head for the exits," said Edward
Glyn, head of global markets at Calastone.
Calastone said for every 1 pound of sell orders of
UK-focused funds, it saw just 59 pence of buy orders last month.
"No other fund sector saw a mismatch this large, and not a
single trading day saw net buying," the company said.
Fixed-income funds attracted a net inflow of 1.23 billion
pounds in January - the second largest monthly bonds inflow on
record - as investors sought to lock in higher-yielding debt
before the Bank of England stops raising rates.
The BoE has raised rates 10 times since December 2021 to try
to tame high inflation.
"There is some rotation going on as UK investors switch to
global funds that are more likely to benefit from a return to
bull-market conditions – we have seen selling of UK funds ramp
up at the same pace as buying of global ones," Glyn said.
"This confidence may be premature, however, as although
interest rates globally are still on the up and corporate
earnings are coming under pressure - this is not yet fully
reflected in global markets."
UK property funds saw a sixth-consecutive month of outflows
in January, with investors selling net 48.3 million pounds of
holdings, as the property sector came under pressure from rising
rates and a weak economic outlook.
Several open-ended UK property funds (managing around $18
billion worth of assets) had restrictions on withdrawals in
place as of early January, after pension schemes sold property
assets to raise cash during a liquidity crisis in September.
Returns on British real estate fell 11.9% in the fourth
quarter of 2022, the biggest quarterly drop since 2008, data
from MSCI's quarterly UK property index showed on Monday.
($1 = 0.8306 pounds)
(Reporting by Elizabeth Howcroft; Editing by Sharon Singleton)
