The complete numbers for asset flows in and out of UK-domiciled funds are in and the data shows just how spooked investors were by market conditions.
Over the past year, withdrawals from UK open-ended funds exceed £23 billion in 2022, the largest outflow in a decade. In comparison, 2021 saw over £27 billion in inflows.
The year overall was dominated by headline numbers beyond this too. Actively managed funds had the highest net outflows on record, equity funds saw almost £22 billion in withdrawals, and non-sustainable funds saw over £50 billion in outflows.
While the year overall hasn’t been great for flows, one period stood out; the majority of redemptions took place in the third quarter. Investors redeemed £15.8 billion from equity strategies alone in what was a remarkable quarter in UK politics (remember Liz Truss and Kwasi Kwarteng?). In comparison, equity funds saw just under £8 billion flow out in Q2 – but received inflows in the first and last quarters of the year. Overall though, equities had by far the largest outflows the entire year.
All UK equity categories saw outflows in 2022. UK large-cap funds saw the largest redemptions across all categories, at £12.6 billion. But also small-, mid-, and flex-caps and equity income funds had outflows at around £2-3 billion.
Most of the other broad categories also saw outflows, albeit at a more modest level: £3.13 billion for allocation strategies, which were regularly seeing monthly inflows of above £1 billion before last year, and £2.70 billion for alternatives.
Fixed income funds were the exception last year. The category had consistent inflows over 2022 and GBP Government Bond was the third most popular category with net inflows of £3.17 billion subscriptions. Other categories, like Global Corporate Bond – GBP Hedged and GBP Corporate Bond – Short Term also attracted net subscriptions over £2 billion each.
The overall outflow is as mentioned by far the largest we’ve seen in the past decade. As seen in the chart below, both 2016 and 2019 saw significant outflows too, but these were offset by other categories which remained popular. Overall, 2016 still saw net inflows of almost £6 billion despite £20 billion equity outflows. And in 2019, £12 billion in withdrawals alternatives were evened out by a similar amount flooding into fixed income.
This year’s inflow into fixed income could not counterbalance the flood of money pouring out of every other category.
Another group safe from outflows were sustainable funds, as associate manager research analyst Jack Fletcher-Price explained in our most recent video.
“This year was a continuation, some might say exacerbation, of some of the trends we’ve seen of flows going to passive and sustainable strategies. Sustainable strategies saw £26 billion of inflows, which isn’t as large as the 2021 figure, but non-sustainable strategies or strategies not labeled as sustainable by their asset manager, saw £50 billion of outflows.”
In comparison, sustainable funds attracted £38.3 billion in 2021, however, this was a year of £27 million in net inflows for the entire UK fund universe. The 2022 flows of £26 billion are still the second highest we have on record, and higher than 2020 where sustainable strategies attracted £14.5 billion.
The Morningstar category Sector Equity Ecology, which contains some of the biggest funds with a sustainable mandate, attracted £5.80 billion. The figure makes it the most popular category of the year. Funds in this group now manage assets of £16 billion.
As Fletcher-Price points out, investors continued to favor passive strategies over actively managed alternatives, a continuation of a pattern that has taken place in equity strategies over much of the last decade.
Over the past 10 years, active fixed income funds have only seen four years of net outflows and last year, it beat passive with higher inflows. However, this year, active fixed income had a net outflow of £4.3 billion, while index funds attracted £13 billion.
Active asset managers such as Baillie Gifford, columbia threadneedleand Janus Hendersonsaw the most severe outflows, while those with passive offerings, such as BlackRock, abrdonand Fidelitymanaged to mitigate some of the outflows from their active strategies.
If we look at individual funds, capital preservation strategies were the ones to top the table for inflows over the year. LF Ruffer Diversified Return and HSBC American Index were the two funds with inflows of over the billion mark (£1.70 billion and £1.07 billion respectively).
Vanguard FTSE UK All Share Index had the largest net outflows with £2.48 billion, but the rest of the bottom table is largely growth offerings, like Fundsmith Equity with £2.42 billion in outflows and Baillie Gifford Diversified Growth with £2.29 billion.