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'Extraordinary' outflows from managed investment funds blamed on Brexit vote

Published 02/08/2016

The Brexit vote is reported to have spooked some investors
The Brexit vote is reported to have spooked some investors

Brexit fears saw retail investors pull £3.5 billion from UK managed investment funds in June in an exodus that eclipsed even the 2008 financial crisis.

The Investment Association figures showed equity funds were the hardest hit, with £2.8 billion withdrawn across the board.

June's withdrawals compare against £561 million pulled out in January 2008, which was the worst month for investment funds in the financial crisis, according to retail investment group Hargreaves Lansdown.

Hargreaves branded the scale of the outflows as " extraordinary", although they represent 0.4% of overall funds under management, which are around twice as high now as they were in 2008.

The figures show that property funds took the brunt of the withdrawals, with £1.4 billion pulled out as investors headed for the exit amid fears over a crash in commercial property prices.

Seven property funds worth around £18 billion suspended dealings at the beginning of July as investors attempted to cash out following the Brexit vote, while others imposed fees on those who did want to sell.

The data also reveals that stocks and shares Isas saw £464 million pulled out on a net basis.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "'The scale of the exodus from investment funds in June is quite extraordinary, with the Brexit vote eclipsing the financial crisis in terms of putting the frighteners on retail investors in the short term."

But he said 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".

The FTSE 100 has staged an impressive bounce back since the immediate aftermath of the Brexit vote, last week hitting its highest level for a year.

The Investment Association said d espite the fund outflows, funds under management rose to £948 billion at the end of June, up from £920 billion a year earlier.

Jason Hollands, managing director of Tilney Bestinvest, said: "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."

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