UK closes 2022 with ten months of outflows

Yasmine Raso

Senior Journalist, Financial Newswire

6 February 2023

New data from UK-based trade body, Investment Association, has found UK funds saw outflows in ten out of 12 months last year, setting a new record annual outflow of £25.7 billion to overtake the last record set during 2008’s Global Financial Crisis of £4.2 billion.

While UK equity funds recorded outflows of £1.1 billion in December 2022 fixed income funds saw inflows of £389 million, a muted figure from November 2022’s £1.4 billion inflow.

The data also showed responsible investment funds recovering from a £148 million outflow in November to record modest inflows of nine million pounds.

Emma Wall, Head of Investment Analysis and Research at British funds management firm, Hargreaves Lansdown, said a combination of factors contributed to the retail fund outflows witnessed in the UK last year.

“It is no surprise to see investors turned off markets in 2022, a year of extreme economic and political turmoil. But the scale of the outflows is eye-watering,” she said.

“Outflows of more than £25bn illustrate the wall of fear investors had to climb to see through the news headlines last year.

“It wasn’t just the atrocities in Ukraine, but the associated inflation and rising cost of living, the disastrous mini-budget from the short-lived Liz Truss prime ministerial leadership, and the lingering spectre of coronavirus which weighed heavily on investors’ minds – and trading.”

Wall also highlighted how 2023 has commenced with a much more “optimistic” swing compared to 2022, as inflation drops, the FTSE 100 seeks to hit new record highs and well-performing tech firms lead the US market upward.

“HL clients have responded to the rally by buying into global equity funds – though more cautious money market and total return funds also hit the top 20 for January,” Wall said.

“Perhaps those investors recognise we’re not out of the woods yet, and know to expect more volatility through the year, as markets digest jobs figures, inflation outlook, central bank policy – and the ongoing war in Eastern Europe.”