UK equities took another big hit in October with funds investing in the asset class suffering net retail outflows of £444m in the month, according to the Investment Association (IA).
Continuing their six-month run of retail net outflows, the IA UK Equity Income sector was the worst selling, losing £272m while UK All Companies suffered a comparable £224m of outflows.
On the flipside, fixed income was the best-selling asset class, with net retail sales of more than £2bn in October, contributing to an overall increase in UK funds under management (FUM) of £29bn in the month.
The latest statistics show IA £ Strategic Bond as the best-selling sector with net retail sales of £1.6bn, while IA Targeted Absolute Return took £400m.
IA Global and Global Bonds received £345m and £327m of net retail sales, respectively. This was followed by IA Mixed Investment 40-85% Shares, which reported net retail sales of £224m.
Mixed asset was the third best-selling asset class with net retail sales of £963m, with the IA adding that the last time mixed asset experienced a monthly outflow was January 2016.
Chris Cummings, chief executive of the IA, said: "2017's record-breaking run continued in October as monthly net retail sales were again in excess of £5bn.
"Industry funds under management also increased by almost £30bn through the month which means at the end of October our members were responsible for £1.194trn of UK investor savings and investments."
Geographically, Japan funds enjoyed the strongest sales figures with net retail sales of £234m, followed by European equity funds, which was the next best-selling asset class, at £220m.
Asia, Global and North America followed with net retail sales of £140m, £129m and £64m, respectively.
Alastair Wainwright, fund market specialist at the IA, said: "For the fifth month in a row, fixed income was the best-selling asset class with net retail sales of more than £2bn.
"For the third month in a row, £ Strategic Bond was the most popular sector with retail investors as they allocated £1.6bn in October.
"Notably, the £ Strategic Bond has featured in the five best-selling sectors each month since December 2016."
Laith Khalaf, senior analyst at Hargreaves Lansdown, commented on the stats: "Investors are ploughing record amounts into investment funds, but at the same time there is an exodus from UK equities, with over £2bn withdrawn from these funds so far this year.
"The root of this is no doubt the current cocktail of political and economic uncertainty enveloping the UK, combined with a stockmarket which is perceived to be propped up by a weak currency and loose monetary policy.
"The main beneficiary of the malaise towards UK equities has been the fixed income sectors, which have continued to attract large sums of money despite the prospect of rising interest rates presenting a headwind for bond funds. There looks to be little value in the bond world at the moment, but in times of uncertainty money does flow towards fixed income securities, seemingly at any price."
Adrian Lowcock, investment director at Architas, added the lack of progress on Brexit negotiations has clearly weighed heavily on British investors in October.
"The possibility of a harder Brexit returned as the October deadline for negotiations to progress to the next stage came and went. Given the uncertainty and lack of clarity Brexit has created it is hardly surprising investors have shunned UK equities in favour of bonds and more defensive assets.
"Given the Bank of England was widely expected to hike interest rates in November and have already been rising in the US, bonds may seem an odd asset class for investors to buy. But with equities seen as expensive, interest rates still at low levels and importantly below the rate of inflation, bonds offer income seekers a relatively attractive return at present, particularly for more risk adverse investors. Investors are being savvy when it comes to bonds, preferring the more flexible strategic bond sector, where managers have the tools to navigate a rising rate environment."
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