UK retail savers took £24.4bn out of investment funds in 2023, according to the latest data from the Investment Association.
This is only the second year that an annual outflow has been recorded, with 2022 seeing outflows of £26.9bn.
Retail fund sales could fall even further this year, with January seeing net retail outflows of £1.1bn (in comparison to £398m of inflows in January 2023).
Gross retail sales through UK intermediaries in 2023, including Financial Planners, were £88bn, representing a market share of 29%.
For January 2024 gross retail sales through UK intermediaries, including Financial Planners, were £6.8bn, representing a market share of 27%.
Miranda Seath, director, market insight & fund sectors at the Investment Association, said: “As we look ahead, we will see how UK investors respond to market shifts in 2024. When, how fast and how far Central Banks cut interest rates remains crucial.
“In January, investors took out £1 billion out of funds, however tracker funds continued to see strong inflows at £1.7 billion. It is also an election year in the US, India and UK, and political change could impact the investment outlook. However, the impact of the market shocks we saw in 2022 have dissipated to a large extent.”
Money Market funds were the best selling asset class in 2023, closing the year with £2.2bn invested overall.
Fixed income was the second most popular, with an inflow of £716m.
Inflows to tracker or index funds remained strong at £13.8bn, with only one month of outflow 2023 in a tough year overall for fund sales.
Outflows from active funds reached £38.1bn in 2023.
Equity funds faced a challenging year, experiencing £22bn in outflows. This was driven by UK equities, which saw £14bn in outflows. Last year was the eighth consecutive year of outflows for equity funds.
Laith Khalaf, head of investment analysis at AJ Bell said that while the Chancellor wants to revitalise investment in UK equities, the market is not listening.
He said: “Active managers, and UK equity fund managers, are at the extremely sharp end of proceedings. UK equity funds saw their worst year on record in 2023 for outflows, somehow eclipsing an utterly diabolical 2022. £13.6 billion was withdrawn from these funds in 2023, compared to £12 billion in 2022.
“This doesn’t augur well for confidence in the UK stock market, which is leaking members and performance to overseas competitors. The Chancellor hopes to revive the fortunes of UK stocks through a British ISA and a Tell Sid style campaign reminiscent of Margaret Thatcher’s privatisation of British Gas. But when it comes to funds, Sid isn’t listening.
“UK equity funds have been in outflows for eight years now and while the government might want to see a U-turn, these latest figures show that UK fund investors aren’t for turning.”
