Funds Suffer Record Outflows in March

Investors pulled billions from fixed income and active equity funds, switching to cash and tracker funds

Annalisa Esposito 20 April, 2020 | 1:12PM
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UK investors withdrew £8.7 billion from funds in March as the Covid-19 sparked widespread panic. UK-domiciled funds suffered their largest ever monthly outflows as worried investors rushed to take their money out of the market.

But the overall figures mask the fact that some areas of the market managed to attract new money; investors poured £2.1 billion into large-cap UK equities despite the fact that the FTSE 100 plunged 25% in the month. 

Two FTSE tracker funds were, surprisingly, the best-selling products in the month. Opportunistic investors may have taken the chance to top up their holdings as share prices reached lows not seen in decades. And while investors snatched almost £4 billion out of actively-managed equity funds, their passive counterparts atttracted £3.1 billion of assets in the month. 

“Given a widespread belief that UK equities were undervalued going into the coronavirus sell-off, a drop of 30%-plus encouraged many investors to invest heavily in UK large-cap equity funds,” says Morningstar analyst Bhavik Parekh. “Passive vehicles in this space saw a large net inflow as investors looked to take advantage of nine-year lows in the UK equity market.”

This trend carried across the pond to the US, with investors also piling money into global and US large-cap equity funds, primarily into trackers funds. Notably, however, the Gold-rated Fundsmith Equity fund saw £461 million of outflows in the month. The fund, run by veteran buy-and-hold investor Terry Smith, has been a long-term favourite with investors and has seen its assets swell rapidly in recent years to more than £18 billion.

Investors Flee Fixed Income

As central banks across the globe slashed interest rates, fixed income was firmly out of favour with investors and saw the greatest outflows, bleeding £5.5 billion in the month - the highest monthly outflow on record. “Cuts in interest rates and spending by central banks was, at first, not enough to abate market concerns and bond prices were slashed, particularly in the high-yield sector,” explains Parekh.


With two rate cuts and base rate now at a record low of 0.1%, UK fixed income saw net outflows of £3 billion across corporate, government and inflation-linked bonds. More than half of this came out of corporate bond funds as investors doubted whether companies would be able to repay their debt if the crisis sparked a deep recession. But it was the iShares UK Gilts All Stocks Index which was the most-sold fund of the month, with redemptions totally £725 million. 

The five-star rated Allianz Strategic Bond fund managed to buck the trend, however, with inflows of £330 million. The fund outperformed its Morningstar Category by almost 16 percentage points and its benchmark, BBgBarc Global Aggregate GBP Hedged, by almost 10 percentage points during the period.

Alternatives Still Out of Favour

Elsewhere, the alternative-multistrategy category, which has featured at the bottom of the flow table for nearly two years, saw no change to this trend in March. “Given the market volatility, an alternative fund is likely to be one of the best prepared for an event such as we had in March. However, poor performance in previous months and years has left alternative funds firmly out of favour with investors,” says Parekh.

Absolute Return funds make up the bulk of this category and have been bleeding assets for some time as disappointed investors have taken their money elsewhere. Many of these funds have failed to deliver on their targets in recent years and in the first quarter of the year, just 28 of the 121 funds in the Investment Assocition Targeted Absoluted Return sector posted positive returns. 

Invesco Global Targeted Returns was the most-sold in the group in the first quarter of the year, with outflows of £750 million, followed by BNY Mellon Real Return and Jupiter Absolute Return, with outflows of £627 million and £553 million respectively. 

Elsewhere, the Europe ex-UK equity category, which has seen persistent outflows for two years, saw further redemptions in March as concerns about the spread of the coronavrius across the continent ramped up. In particular, the three-star rated L&G European Index saw the highest net outflow (£235 million) in this category.

Allocation funds, meanwhile, bled £665 million, but this was not outside what has been seen in normal market conditions. Property funds only saw a small outflow, “but this was helped by the fact that many suspended dealing on the funds during March as a result of increased redemptions,” says Parekh.

Piling into Passives

In an environment where investors are piling into broad market passive funds, Vanguard was an obvious beneficiary; the fund group saw net inflows of £1.2 billion in March, led by a £704 million inflow into the Silver-Rated Vanguard FTSE UK All Share Index. The firm has a limited fixed-income offering, which may have helped it in the month; while its two fixed-income products saw net outflows, this hardly dented the group's overall figures for the month.

Blackrock attracted a relatively meagre £80 million of assets in the month although its passive arm, iShares, saw inflows of £1.3 billion into its equity trackers.


The highest net inflow for any global equity fund was State Street ACS Multi-Factor Global ESG Index Equity, which lost £213 million in subscriptions. The fund aims to track the MSCI World Select 5-Factor ESG Low Carbon Target Index and is only available to institutional pension clients. Despite this, sustainable funds as a whole saw a small net outflow in the month, even despite the fact that many outperformed their non-sustainable peers. “Many of these funds performed well in March given that they do not invest in energy, the worst-performing sector,” says Parekh.

A dash to cash by panicked investors can be seen in the popularity of Money Market funds in March, with some £662 million poured into the safe haven sector. While it wasn't a record-breaking month for the group, the positive figures stands in stark contrast to the other fund categories. BlackRock Cash fund and L&G Cash Trust were the most popular cash funds, attracting £417 and £326 million each in the month. 


The monthly fund flows are a fascinating insight into investor behaviour as they experienced one of the quickest swings into a bear market in history, but Parekh says it crucial to keep the bigger picture in mind: “While outflows of £8.7 billion is clearly a large figure, it is important to note that as a percentage of assets, less than 1% of assets were withdrawn. On a relative basis, March's net outflow was only comparable to October 2008.”

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Annalisa Esposito  is a data journalist for

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