Mini-Budget fuels near record £7.6bn fund outflow

Data from the fund manager’s trade body, the Investment Association, revealed that the September outflow was the second highest ever after March 2020 when outflows hit £9.7 billion as the pandemic hit.

The IA says that there are signs that the mini-Budget in September may have fuelled some of the outflow.

Markets and gilts were hit by the repercussions of the mini-Budget in September from former Chancellor Kwasi Kwarteng.

Chris Cummings, chief executive of the Investment Association, said: “The political and economic uncertainty over the last few months came to a head with the fiscal policy announced in the ‘mini-Budget’ in late September.

“The resulting market turmoil contributed to investors pulling £7.6 billion from funds, the second highest monthly outflow on record. Outflows from equity funds have been increasing month on month, as economies globally continue to slow and central banks maintain their cycle of rate hikes.

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“Despite the historic rise in UK gilt yields following the mini-Budget, which caused gilt prices to plummet, UK Gilts was the highest selling sector this month as some investors saw opportunity amidst the turbulence. We have seen outflows from funds in eight of the first nine months of 2022, and while volatile markets can provide opportunities, investors are still waiting for a period of relative market and economic stability.”   

Key data for September 2022 showed:

• Equity funds saw almost £5 billion in outflows, the highest monthly outflow on record, driven by outflows from global equities of £2 billion. UK equity funds saw outflows of £1.3 billion
• UK gilts was the best-selling IA sector this month, with net retail sales of £412 million, and UK Index Linked Gilts was second with inflows of £202 million, despite turbulence in the gilt markets
• Responsible investment funds saw outflows of £211 million for the first time since February 2021
• Tracker funds saw modest outflows of £264 million, only the second monthly outflow in 2022
• Fixed income funds and Mixed asset funds saw outflows of £612 million and £785 million respectively

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