Fearful savers lead a £460m fund exodus
NERVOUS savers have pulled almost half a billion pounds out of the stockmarket in the biggest exodus since the financial crisis.
Growing fears about the global economy and the safety of banks has spooked British investors.
Figures from the Investment Association show savers withdrew £463m more from stockmarket f unds than they i nvested in January.
This is the first time the investment industry has reported a ‘net outflow’ since October 2008 – the month after Wall Street investment bank Lehman Brothers collapsed and triggered the Great Recession.
The slowdown i n China and emerging markets was a particular cause of concern. Savers pulled £272m out of global funds which invest in countries across the world – the biggest withdrawal since records began in January 1992.
Some £200m was taken out of Asian funds.
A string of fund managers, including emerging markets specialists Aberdeen and Ashmore have seen billions of pounds withdrawn from their funds.
Funds which invest in UK companies have also fallen out of favour for the first time since before the General Election last May, with an outflow of £158m.
But the biggest outflows came from bond funds, which lost £267m. Many investors opted to put their money in cash, amid predictions that interest rates would finally rise. Experts have warned the prospect of the EU referendum on June 23 is creating even more uncertainty.
More than £85bn was wiped off the value of Britain’s biggest firms in the worst ever start to the year for the UK stock market.
In a bruising setback for savers, the FTSE 100 index of leading companies tumbled 5.3pc in the first five days of trading of 2016 because of worries that the economy is faltering in the face of fierce global headwinds. The index has lurched wildly up and down since then, prompting many people to take their money out of stock and shares and into cash.
Blue-chip stocks including banks and mining companies – a staple of UK pension funds – have been hammered amid concerns about the economy, the safety of banks and the rout in commodity prices.
A report by Bank of America Merrill Lynch last month revealed that even fund managers are getting nervous about the volatility in the stockmarket.
It found that professional investors are pulling their money out of stocks and shares and have more cash in the bank than during the financial crisis.
Last night one expert said it is understandable why many savers are panicking, with former Bank of England governor Lord King becoming the latest heavyweight to warn that another financial crisis is looming.
David Buik, from stockbroker Panmure Gordon, said: ‘When you’ve seen share movements of seismic proportions for big multi national companies it makes people incredibly nervous.
‘Investors were on a hiding to nothing with these unbelievable levels of volatility. The stockmarket has just become too risky.’
But one expert said investors are overreacting. Justin Urquhart-Stewart from Seven Investment Management said: ‘Investors are getting frightened by the string of remorselessly bad news, which ignores the underlying strength of economies such as the UK, the US and China, which are still growing. This is an overreaction.’