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Sunday, April 11, 2021
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Investors withdraw $1 trillion from UK-focused equity funds since Brexit vote

Post-referendum uncertainty and threat of Corbyn government lead investors to withdraw more than $1 trillion from UK-focused equity funds

Investors have withdrawn more than $1 trillion from UK-focused equity funds since the EU referendum in 2016 as concerns mount about the damaging impact of Brexit on Britain’s corporate sector.

Extreme uncertainty for business due to Brexit confusion plus the prospect of a hard left Labour government led by Jeremy Corbyn have tarnished the appeal of UK equity funds, which have haemorrhaged $1.01 trillion of net outflows since June 2016, according to EPFR, a data provider.

Investors have pulled money from UK equity funds every week since the UK voted to leave the EU. Outflows surged to $19.4 billion in the week when UK prime minister Theresa May presented the draft withdrawal plan to the cabinet, the highest level of outflows since the 2007-08 global financial crisis.

In the 12 months preceding the Brexit vote, UK equity funds attracted inflows of $127 billion.

Schroders, the London-listed asset manager, conducted a survey this month of 400 financial advisers who reported that 35 per cent of their clients had either moved assets out of the UK this year or were considering doing so, up from 21 per cent in the previous year’s survey.

The US ranked as the top destination for money reallocated from UK assets. Japanese and emerging market equities also gained new business from the reallocations.

Just under nine out of 10 UK advisers cited Brexit as the biggest worry confronting their clients over the next 12 months.

Head of UK intermediary at Schroders, Philip Middleton said Brexit completely dominates the concerns highlighted by financial advisers.

Aversion to UK equities among international investors has risen as political tensions over Brexit have intensified ahead of the conclusion of negotiations with the EU.

Last month, the UK stock market was rated the least popular of 22 asset classes among global fund managers, according to a widely watched Bank of America Merrill Lynch survey.

Worries about Brexit were discussed at an event hosted earlier this month by UBS for large institutional investors overseeing trillions of dollars in assets.

Global chief investment officer at UBS Wealth Management, Mark Haefele said many of these sophisticated investors believed the UK’s financial markets were not amenable to rational economic analysis.

A senior analyst at the brokerage Bernstein, Inigo Fraser-Jenkins said the outlook for equities was dependent on unpredictable political forces that have left the UK stock market close to uninvestable. Investors simply have better options elsewhere.

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