Investors spooked by Brexit and commercial property fears pull £3.5bn from funds in June - six times more than at height of the financial crisis
- Investors piled out of retail funds after the referendum as markets dipped
- At height of financial crisis £561m was pulled from funds in one month
- Property funds saw £1.4 billion outflows, despite redemption restrictions
- Fixed income funds did best as investors moved towards safe havens
Investors cashed in their investments to the tune of £3.5billion in June as the fear and subsequent realisation of a Brexit vote took its toll on confidence and the markets.
The rush for the exit comfortably eclipsed that seen at the height of the financial crisis, even taking into account that total assets under management are about twice as high now, said Hargreaves Lansdown's Laith Khalaf.
'By comparison, in the worst month of withdrawals during the financial crisis, January 2008, retail investors withdrew £561 million from UK investment funds,' he said. 'In October 2008, just after the collapse of Lehman Brothers, retail investors withdrew £493 million from UK investment funds.'
Property panic: Commercial real estate funds suffered £1.4bn of outflows in June
The biggest redemptions were from equity funds, those which invest in shares, which suffered outflows of £2.8billion, according to the figures released by the Investment Association.
But the biggest individual sector outflow was seen by commercial property, with redemptions worth £1.4 billion in June, as investors ditched them despite charges being imposed or escaped before trading was suspended in some giant funds after the referendum on liquidity fears.
Property funds have hit the headlines post-Brexit after many imposed restrictions to stop investors from selling out.
While every region saw outflows, usually popular UK Equity funds were the hardest hit with a loss of £1billion, followed by European funds which lost £813million.
Global equity funds were also hit hard, with outflows of £386million, while Asian equity funds and North American equity funds experienced outflows of £191 million and £186 million respectively.
Meanwhile, Japanese funds saw the lowest equity outflow of £131million.
By contrast bonds looked attractive - fixed income was the best-selling asset class in June with net sales of £258 million, as investors looked to diversify away from equities and lower their overall risk profile.
|Region||Net retail sales June 2016||Average net retail sales for previous 12 months|
|Figures: Investment Association|
The IA's interim chief executive Guy Sears said: 'The retail outflow in June occurred in the context of record levels of funds under management, and represented just 0.37 per cent of total assets during a period of intense market volatility.
'Clearly, Brexit has been unsettling, with property and equity funds particularly affected following earlier outflows during 2016. At the same time, flows were positive into fixed income and targeted absolute return sectors as investors sought safer harbours.'
Despite June's rush to pull out, total funds under management for the industry were still higher last month at £948billion that they were a year earlier at £920billion.
Investors who did pull out of funds could have seen themselves give up potential gains as a result. After falling immediately following the Brexit vote, the UK's leading stock market index the FTSE 100 then climbed and currently stands up 5.25 per cent on referendum day, at 6,671.
Meanwhile, the broader FTSE All-Share index is also up 4.1 per cent at 3,626.
Tilney Bestinvest's Jason Hollands said claims that Brexit would create a 'market meltdown' had been proven wrong.
He points out that the FTSE 100 has moved higher since the vote and that even the more domestically-focused FTSE 250 has recovered after its initial sell-off.
'Of course, the really interesting data will come next month when we find out what happened in July, the month after the vote.
'Amongst our own clients we saw increased new investment activity, initially from clients buying into the sell-off but which broadened out as markets stabilised and the sky did not fall in after all.
Hollands' concern is that investors have become transfixed by Brexit and 'may have become immune to other, much greater risks hanging over the markets'.
'In our view, China continues to pose a considerably bigger risk than Brexit ever did, given its persistent pursuit of debt fuelled stimulus and worrying manufacturing overcapacity.
'More broadly there is still too much leverage trapped in the financial system after years of relentless stimulus programmes and in the aftermath of Brexit, way be about to pile on more liquidity with a further cut to interest rates this week. These financial sugar rushes cannot go on forever.'