Although stock markets ticked nervously upward in May for the fifth month in a row, investors pulled their money out of open-end equity funds domiciled in Europe. While this does reflect unease, it was by no means a stampede, considering the uncertainty surrounding the UK’s referendum on EU membership on June 23.
In fact, investor behaviour can be interpreted as indecision regarding the dangers of a possible vote for Brexit. This is also reflected in the stance investors took regarding categories focused on UK equities and sterling-denominated bonds. While all six sterling-denominated equity categories saw outflows in May, the combined outflows of EUR 1.2 billion were below April levels, and much less significant than the outflows from the UK equity categories in the first half of 2015.
At the same time, sterling-denominated bond categories witnessed increasing outflows indicating that European investors may have had UK-specific concerns. However, the redemptions of EUR 457 million in May were nowhere near levels seen ahead of the Scottish independence referendum in September 2014.
Further findings from Morningstar’s fund flows report for May include:
Ali Masarwah, EMEA editorial director for Morningstar, comments: “In all, our asset flow data for the UK equity and fixed-income categories does not support the idea of a stampede out of UK equities and sterling-denominated bonds ahead of the UK’s referendum on EU membership. Rather, our data suggests that while investors may have had concerns given the general uncertainty around the referendum, they apparently did not expect Brexit to actually happen.”