Calastone: Fixed income funds suffer from market volatility as investors pull £128m
Equity funds were hit by a fifth consecutive month of outflows, with £206m pulled in September.
Investors redeemed £128m from bond funds last month, while safe haven and high-yielding money market funds brought in a net £189m.
The outflows from bond funds come on the back of a weak August, which saw investors pull a net £330m of their fixed income holdings. Between January and July, investors poured £4.7bn into bond funds.
According to Edward Glyn, head of global markets at Calastone, the bond markets are «in the driving seat at the moment».
IA: Inflows into trackers double in August as fixed income funds revert to outflows
«One moment, inflation coming in better than expected or central banks hitting pause on interest rates causes a bond market rally. The mathematical alchemy that links bond yields to stock market valuations, as well as investor hopes for a soft economic landing, give equities a boost,» he said.
«The next moment, policymakers take the punchbowl away with a warning that rates will stay high for the foreseeable future — bond yields surge and equity markets sag. Clear signs of sustained disinflation accompanied by a definitive turn in the rate cycle seem to be top of the wish list for market bulls at present.»
Equity funds were hit by a fifth consecutive month of outflows, with £206m pulled in September. However, the outflows were the least severe since February this year.
Among geographical sectors of equity funds, UK-focused funds saw the largest outflows, with redemptions of £448m. Meanwhile, investors withdrew a net £285m from the North American fund sector.
«The distaste for UK equities is a structural trend that domestic and international investors are unwilling to break, despite attractive
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