No Deal Brexit fears lead to ‘exodus’ from UK equity funds
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The Financial Times reports that more than US$4bn has been pulled from UK equity funds since Theresa May announced her decision to step down as Britain’s prime minister as fears mount that the UK is heading for a no-deal Brexit under her successor, Boris Johnson.
Investors have withdrawn $4.2bn from UK equity funds since late May, according to EPFR, a data provider. Outflows since the Brexit referendum in 2016 have climbed to $29.7bn.
Arnab Das, a global market strategist at Invesco, said that the threat of a no-deal Brexit was increasingly being priced in by investors.
“The political dynamics have shifted from trying to negotiate unworkable compromises with the EU and within the UK parliament towards a fundamental reboot. That may lead to no-deal but there is also a significantly increased chance that there will finally be some sort of resolution to the thorny issue of Brexit itself,” said Mr Das.
No-deal fears also hit investor appetite for UK property funds, which suffered net withdrawals of £410m in July — their highest monthly outflows since January — according to Morningstar.
“With the appointment of Boris Johnson as prime minister, a hard Brexit became increasingly likely and investors further shunned UK property assets,” said Bhavik Parekh, associate analyst for manager research at Morningstar.
Property funds, which invest heavily in commercial real estate, the value of which is sensitive to changes in the macro environment, have been hit by the Brexit unease.
Investors pulled £1.9bn from the products over the 12 months to the end of July, with outflows peaking around times of particular uncertainty, such as the original March 29 Brexit deadline.
