Budget-anxious investors pulled £5.9bn out of funds in October, making it the third worst month on record.

Data for October released this week by the Investment Association revealed that equity funds were particularly badly hit, with outflows of £4.2bn in October.

UK Equity outflows jumped £1.3 billion, their highest level since May.

The setback at the start of Q4 2024 disrupted a more positive period of sales for the UK fund industry, the IA said.

Investors took flight after Budget speculation of higher taxes took hold although many of the worst fears did not materialise.

Key changes in October 2024:

• All asset classes saw outflows, with equity funds bearing the brunt with £4.2 billion in outflows. All equity regions were in outflow, with the highest withdrawals from globally diversified funds, which saw £1.8 billion in outflows.
• UK Equity outflows rose to £1.3 billion, their highest level since May 2024.
• Bond funds saw outflows of £822 million, up from £114 million in September. There did remain pockets of inflow in fixed income however, notably Corporate Bond (£262 million) and UK Gilts (£156 million).
• Mixed asset funds saw outflows soften slightly month-on-month, from £534 million to £445 million, but outflows remain high by historic standards.
• Others - £46 million in outflows overall, despite £470 million into Volatility Managed, which was the top selling sector.
• Index tracking funds remained in inflow with net retail sales of £880 million, however this was the lowest inflow in a year.

BEST SELLING INVESTMENT ASSOCIATION SECTORS 

The 5 best-selling Investment Association sectors for October 2024 were:  

1. Volatility Managed with net retail sales of £470 million.
2. Corporate Bond followed with net retail sales of £262 million.
3. UK Gilts with net retail sales of £156 million.
4. China/Greater China with net retail sales of £140 million.
5. Mixed Investment 40-85% Shares was fifth with net retail sales of £29 million. 

The worst-selling Investment Association sector in October 2024 was Global, which experienced outflows of £1.1 billion.

NET RETAIL SALES BY ASSET CLASS

All asset classes experienced outflows.

Other saw £46 million in outflows.

Property saw £64 million in outflows.

Money Market saw £362 million in outflows.

Mixed Asset saw £445 million in outflows.

Fixed Income saw £822 million in outflows.

Equity saw £4.2 billion in outflows.

NET RETAIL SALES OF EQUITY FUNDS BY REGION

All equity regions experienced outflows.

Asia funds experienced outflows of £216 million.

Japan funds experienced outflows of £226 million.

Europe funds experienced outflows of £339 million.

North America saw net retail outflows of £746 million.

UK funds saw net retail outflows of £1.3 billion.

Global funds saw net retail outflows of £1.8 billion.

TRACKER FUNDS

Tracker funds saw net retail inflows of £880 million in October 2024. Tracker funds under management stood at £358.6 billion at the end of October. Their overall share of industry funds under management was 24%.

RESPONSIBLE INVESTMENT FUNDS

Responsible investment funds saw a net retail outflow of £572 million in October 2024. Responsible investment funds under management stood at £103.2 billion at the end of October. Their overall share of industry funds under management was 6.9%.

Miranda Seath, director, market Insight & fund sectors at the Investment Association, said: “As details became clearer on the scope and depth of the Government’s impending tax reforms, it was inevitable that some investors would make changes to avoid an increase in their tax liability, in what was an already complex investing environment.

“This has resulted in the highest outflows from the large equity sectors, in anticipation of the capital gains tax rise. However, with every asset class experiencing outflows, this indicates broader uncertainty among investors about the potential impact of the Budget, including speculation over tax changes to pensions.

“Looking ahead, with the Budget now behind us and a long-term fiscal policy in place, investors have greater clarity on the path the Government will take. For UK equities, the near-term outlook remains challenging. Yet, if Labour can successfully deliver the economic growth in the domestic economy it has promised, we may see green shoots of growth and with it the longer-term potential for a return to investor appetite for funds investing in their domestic market, where shares are relatively cheap compared to US company valuations.”