June saw £3.5 billion withdrawn from UK investment funds, according to figures released from the Investment Association today.
£1.4 billion of this was taken from the property sector, which resulted in some funds suspending trading at the time, while the rest came from equity funds (£2.8 billion) and Isas (£464 million).
These figures may not sound much given figures amounting to billions and even trillions being bandied about the news on a daily basis, until you compare them to figures touted in other recent significant economic events. For example, according to the Investment Association:
• In January 2008, as the worst financial crisis since the 1930s really started to bite, UK investors extracted £561 million from funds.
• In October 2008, after Lehman Brothers declared bankruptcy, investors withdrew £493 million.
There is about twice as much money under management now as there was back in 2008, but even weighted with that in mind today’s figures are significant.
What does this mean for the UK economy?
One thing to note is that even though this £3.5 billion number is pretty staggering, it makes up just 0.37% of total assets under management in the UK.
It’s also worth bearing in mind that as well as outflows, this turbulent time also saw inflows as investors looked for ‘safe’ places to put their money - fixed-income and money market funds saw money pumped in at £258 million and £157 million, respectively. People aren’t setting fire to their cash.
Nevertheless, the numbers speak volumes of the fear that has gripped a lot of investors, as Laith Khalaf, senior analyst at Hargreaves Lansdown says: “Clearly investors were rattled by the referendum… UK investors who withdrew from equity funds are probably regretting this decision in light of the performance of the stock market since the referendum, and that goes in spades for those who cashed in their ISA allowance, losing that tax shelter forever.”
Jason Hollands, managing director at Tilny Bestinvest adds: “While the economic impact of the Brexit vote is unclear at this stage, alarmist claims that it would prompt a market meltdown have proven wrong. Fears of the vote posing a systemic risk to capital markets have abated, the FTSE 100 is trading higher in Sterling terms than it was prior to the vote and the more domestically skewed FTSE 250 Index has recovered from the initial knee jerk 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.”
So it seems to be business as usual, with the UK economy volatile but resilient - to the extent that Aberdeen Asset Management has cut the levy on its UK property fund to the same level as it was pre-referendum.