A reversal in sentiment for UK equities?
Reviewing a challenging H1 2019 for the asset class
It has been an eventful first half of 2019 for the asset management industry and in particular UK equity funds.
Continued uncertainty surrounding Brexit - and the leadership of the UK Government - meant investors shunned the asset class or continued to flee UK equity funds.
Since the start of 2016 to the end of Q1 2019, some £13.2bn has been withdrawn from UK equity funds, according to data from the Investment Association.
UK equity funds have seen consistent outflows for every quarterly period during that time, a strong indicator of the poor sentiment towards the asset class.
Meanwhile, poor performance from fund manager Neil Woodford has meant investors have withdrawn £1.2bn from the Woodford Equity Income fund alone since 2 January, before it was gated on 3 June.
Investors seek fixed income and money market funds amid heightened risk aversion
While it can be argued it has been a dire period for the overall UK fund industry - Morningstar stats show an astonishing £42bn of outflows from UK-domiciled funds over the past year to end of May - UK equity funds have definitely borne the brunt of investor caution.
However, could we be on the cusp of a reversal in sentiment?
UK equity fund managers have been hammering home that their asset class is ripe with opportunities for stockpickers despite Brexit, slowing economic growth and evidence that markets are nearing the end of a decade-long bull run since the Global Financial Crisis.
The above figures imply many investors have not agreed - until recently that is.
Morningstar stats show UK equity funds actually saw inflows in May - and a significant sum of just under £470m.
This follows consecutive outflows of £860m in January, £757.4m in February, £840m in March and £620m in April.
Additionally, the IA reported UK equity funds were the best-selling region in May with net retail sales of £532m.
Three years on from the Brexit referendum: What have we learned?
From 2 January to end of May, Morningstar shows UK equity funds are still in outflows with a total of £1.1bn fleeing the asset class - hardly a number to shout about.
But the fact outflows have slowed and reversed recently is encouraging for UK investors.
Of course, the UK's problems are far from over.
Brexit has been pushed further down the line, and at the time of going to press we do not know who the next Prime Minister will be, if there will be a General Election or even a second referendum later this year. Nor do we know the outcome of the Woodford saga.
However, investors appear to be waking up to the fact much of the bad news and the various potential Brexit outcomes have been "baked in" to prices and are beginning to take advantage of "cheap" valuations, which will of course be music to UK fund houses' ears.
More on Equities
Most read
