Record Outflows from Global Equities

horace972897

Anyone else getting jittery?

https://uk.finance.yahoo.com/news/uk-investors-record-outflows-equity-funds-stock-markets-114418613.html

Albermarle

There is a lot of discussion on the pensions forum about increased amounts of tax free cash being taken from pensions ahead of the budget. Especially those with larger pots.
Just a theory !

InvesterJones

Albermarle said:

There is a lot of discussion on the pensions forum about increased amounts of tax free cash being taken from pensions ahead of the budget. Especially those with larger pots.
Just a theory !

In the article, fixed income and money markets received inflows worth about 3/4 of the equities outflow, so the majority is staying invested, just not in equities.

dunstonh

Anyone else getting jittery?

no.

You need context.   It says "record amount".  However, the data is only for 11 years.     So, it's a very short period.

Most money invested by UK investors is in model portfolios (adviser or discretionary, multi-asset or professional administrators).   Most of these rebalance quarterly or yearly.   This quarter saw a significant rebound from earlier in the year.   So, any rebalancing portfolio is going to be taking money out of equities to place into defensive assets.

The same Calastone flow index showed outflows from fixed interest after the stockmarket falls earlier in the year with equities having inflows.   Now it has reversed again.

Also, like last year, larger investors are doing their CGT use before the budget and portfolios are being realigned to hold more defensive assets in GIAs and growth assets in ISAs.   So, sales that may have been done later in the tax year are being done earlier.

Portfolios are increasingly tilting away from US equities and Europe, in particular, has been a beneficiary from that.

Finally, think context.  Over £10 trillion is invested by UK investors (UK-domiciled).    It's a movement of 0.036%.

Good advertising by Calastone though.  The media laps up this sort of data.

Albermarle

Finally, think context.  Over £10 trillion is invested by UK investors (UK-domiciled).    It's a movement of 0.036%.

When reading the article, I wondered if the sums mentioned were probably very small compared to the overall amounts invested.
Thanks for confirming how small they are !

TheTelltaleChart

This kind of data is utterly useless.

£3.6bn was withdrawn from equity funds. Does that mean the funds sold £3.6bn of equities? Well, only if they are always 100% invested in equities. They could have funded redemption of units by reducing the level of cash they hold instead, if they hold a little cash (and if £3.6bn is a small proportion of their total assets, as I'm sure it is). But let's suppose they are always very nearly fully invested, so that's not what happened.

So who did the equity funds sell the equities to? There are lots of possible answers (multi-asset funds, or any investment vehicles not classified as a fund, or direct investors, etc). It doesn't really matter who they sold to. The point is just: for every seller, there must have been a buyer. That's the normal operation of a market. If there had been far more sellers than buyers, then we would have seen prices crashing, markets seizing up, or that sort of thing. Instead, markets have been buoyant though volatile.

In theory, it might be possible to look at who the buyers and sellers are, and try to work out which of them is the "smart money", in the hope that that would give clues about the future direction of markets. Much easier said than done, though. But this kind of reporting isn't even attempting that: it's just pointing out some of the sellers, and carefully not pointing out that they must be matched by equal numbers (measured by value traded) of buyers, and hinting that this must be ominous. Absolute nonsense. Ignore.