Sunniva Kolostyak: Welcome to Morningstar. Investors withdrew an astonishing £11.25 billion from UK funds last month. Here to explain what happened is Jack Fletcher-Price, Associate Analyst at Morningstar.
Jack, thanks for being here. What's going on?
Jack Fletcher-Price: So, on an absolute basis, we think September's outflow was potentially the largest of all time. We can't be sure though, as our conclusive data doesn't go back as far as 2008 when there might have been a few months during the Global Financial Crisis where outflows were elevated. On a relative basis as well, we're probably less sure. For context, the UK open-ended fund space has grown from roughly 630 billion to over 1.4 trillion sterling since 2013. So, going back further to 2008, we again can't be sure of what the sort of proportional outflows would have been around that time. Our sense is, most of the activity happened following the Chancellor's mini budget on the Friday before the final week of September. But flows are usually elevated during that last week of the month. So, it may be facile to purely put that down to the Chancellor's announcements.
SK: So, were there any particular categories of funds that did worse than others?
JFP: So, maybe interestingly to some, we actually saw inflows to sterling government bond and sterling inflation linked bonds. This may have been an indication that investors were looking to lock in those higher yields that we saw in the immediate aftermath of the announcement. But again, we can't be sure. There were also some flows to some short-dated bonds which are less sensitive to interest rates. So, maybe that's a sign that investors were trying to take a risk-off approach. We also continued to see some flows to Ruffer strategies which are sort of primarily capital preservation, and they currently have their lowest equity exposure in their history.
SK: So, good for some. But if we look at this from a trend perspective, do you see this continuing along the same line going forward as well?
JFP: So, September's record outflow to all asset classes follows on from August record outflow from equity strategies. So, that trend was there before the Chancellor made his announcements, in all honesty. As always, we encourage investors to stay invested. Trying to time the market can be a futile exercise, and there's lots of studies out there that show that missing out on some of the best days can really, really damage your long-term returns from investments.
SK: Jack, thank you very much for being here today. For Morningstar, I'm Sunniva Kolostyak.
