Sales of active equity funds sold in the UK dropped by more than 90 per cent last month after the coronavirus outbreak in China led to a sharp deterioration in investor confidence.
Actively managed equity funds registered inflows of just £78m in January, down 93 per cent on the previous month, according to Calastone, the global funds transaction network.
“Stock markets have swooned since the coronavirus hit, as share prices have been marked down sharply in the expectation of slower global growth,” said Edward Glyn, head of global markets at Calastone.
January was a month of two halves. Active equity funds attracted inflows of £206m in the first two weeks of January, which reversed as evidence of the mounting scale of the coronavirus outbreak became apparent, leading to outflows of £128m in the latter half.
“Active funds bear the brunt of selling in times when confidence is weak,” said Mr Glyn.
Sales of index-tracking equity funds were less severely affected with inflows dropping by about half last month.
As a result, overall net inflows into active and passive equity funds combined fell to £618m in January, down 70 per cent from the £2.1bn gathered in December when Boris Johnson’s decisive general election victory sparked a sharp increase in new business from UK investors.
More than 40,000 cases of a new strain of coronavirus have been confirmed worldwide along with the deaths of more than 900 people, leading to extensive disruption to business in China. Many mainland businesses have extended new year holidays, which were due to end on February 10, or implemented work-from-home arrangements to contain the deadly outbreak.
Mr Glynn said investors were still absorbing the potential hit from coronavirus on Asia as well the effects on global industrial sectors such as airlines and automobiles.
Asia-focused funds tracked by Calastone suffered outflows of £61m in January, their worst month in two-and-a-half years. The January outflows were equivalent to more than a fifth of the inflows of £271m registered by Asia-focused funds over the whole of all 2019.
In contrast, inflows to the relative safety of fixed income funds rose modestly to £647m in January, about 50 per cent higher than their 12-month average.
Calastone estimates that more than two-thirds of UK fund flows by value pass across its network each month, providing a timely insight into shifts in investor sentiment.