The volatile markets this year have sent some investors running to cash, while others have switched to relative safe havens, such as bonds or gold. As we’ve now reached the six-month mark in the year it is a good time to look at the individual funds which have seen the largest outflows during this period.

Using Morningstar data it’s possible to look at how much money investors have pulled from funds, while removing the impact of performance on flows. These figures show just what investors have redeemed from funds, not the impact of performance or losses on the fund assets.

EXODUS FROM ABSOLUTE RETURN SECTOR CONTINUES

In theory the Absolute Return sector should have been a natural home for nervous investors during market falls, as the funds aim to deliver positive returns in all market conditions and limit the losses that are seen across markets.

However, investors have been leaving these funds in their droves. This was the case before the Covid-19 crisis hit markets, with Absolute Return funds having seen outflows for 23 consecutive months, up to May (the latest figures available). It has continued during the pandemic, with March alone seeing the largest monthly outflows during the past two years.

Merian Global Equity Absolute Return (BLP5SB3) has seen the worst of the outflows so far this year, losing £1.7 billion of customer money in the past six months. The fund has lost 4.1% over the past half year – more than double the average return of funds in the sector, which stood at -2% year-to-date.

Coming second for outflows is Invesco Global Targeted Returns (BJ04HL4), with £1.2 billion of outflows, but as this data only runs until the end of May (June data isn’t yet available for this fund) the figure could be far higher.

The fund has returned -1.3% in the year so far. Meanwhile ASI Global Absolute Return (B7K3T22), which is often seen as the pioneer of the sector, has seen £759 million of outflows (with the figures also not including June’s flows data).

The fund has seen a dramatic fall from grace after reaching around £27 billion at its peak and has now fallen to £3.8 billion in assets, with eye-watering customer outflows of more than £21 billion over the past five years.

UK EQUITY FUNDS STRUGGLE

Investors in UK markets are still sitting on heavy losses as we hit the six-month marker in 2020, with the FTSE 100 index down 17%, the FTSE All Share down a similar 18% and the FTSE 250 index of smaller companies down just over 21% during that time.

However, UK equity funds overall have seen inflows so far this year. But UK fund managers haven’t covered themselves in glory, with the average UK All Companies fund delivering the same return as the FTSE All Share year-to-date, of -18%, rather than outperforming markets as you might have expected active fund managers to do. In total, almost half of active funds in the sector have delivered a worse return than the index.

The worst of the outflows were from the LF Majedie UK Equity (B8BH0R2), which saw £660 million of investor money pulled, followed by Invesco High Income UK (3303148), which had £606 million of outflows up to the end of May, and HSBC UK Growth & Income (B0S7PF2), with £577 million of outflows.

The Majedie fund was far from the worst performer in the sector over the past six months, with a loss of 17%, just ahead of the average for the sector. But the outflows on the Invesco fund are more likely to be performance related, as the value-focused fund handed investors a 28% loss during the six months, while the HSBC fund returned a loss of 24%.

INCOME WITHDRAWALS

Investors in UK Equity Income funds have fared worse, with the average fund manager losing more than the FTSE All Share and the FTSE 100 – an average fall of 20.3% year-to-date. What’s more two-thirds of funds in the sector delivered a worse return than the FTSE All Share. This likely reflects the swathe of dividend cuts and suspensions seen amid the global pandemic.

The JOHCM UK Equity Income (B03KP23) fund has been the worst for outflows in the sector, with £579 million withdrawn by investors during the past six months, followed by Schroder Income (764890), with £340 million of outflows, and LF Miton UK Multi Cap Income (B41NHD7) with £160 million of outflows.

The JOHCM fund has been one of the worst performing in the sector, handing investors a 29% loss over the past six months, while the Schroder fund has delivered a 26% loss. But interestingly, the Miton fund has been the best performing of its peer group, albeit still delivering a loss, but far lower at -8%.

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