Asian equity funds see record outflows in June

The latest data from the Investment Association (IA) shows that Asian equity funds shed £288 million in June - the sector's largest single monthly outflow on record.

This follows the spectacular recent decline of China's stockmarket since reaching an all-time high on 12 June, with the Shanghai Stock Exchange Composite Index recording losses of close to 30% in early July.

Concerns over an impending interest rate hike at the US Federal Reserve have also negatively impacted the region, with investors seemingly anticipating large declines within emerging markets when the Fed finally moves rates from their historic low of 0.25%.

Accordingly, the worst-selling individual IA sector in June was Asia Pacific excluding Japan, which saw a net retail outflow of £226 million. This is the largest since February 2014 when, again, speculation over an interest rate hike at the Fed prompted mass sell-offs in Asia.

Fixed income was the worst selling overall asset class, shedding £198 million in June - its worst month for over a year. This is also linked to anticipated interest rate hikes, which tend to cause the relevant bond yields to rise and prices to fall - leading to losses for current holders.

Investors seek out active management

The best-selling sector was targeted absolute return, which netted £445 million of assets in June followed by UK equity income, which took £438 million over the month.

Mixed-asset funds enjoyed their best month since July 2014, netting £404 million while the UK all companies sector, which had been the worst-selling sector for the previous five months, saw positive net sales (£38 million) in June for the first time since October 2014.

According to Daniel Godfrey, chief executive of the IA, the strong flows into absolute return and multi-asset funds suggests that investors are looking to active managers to decide their asset allocation in the current climate.

"Net retail sales held up well in June despite the uncertainty surrounding the Greek bailout and Chinese markets. Most striking was mixed-asset funds having their best month since last summer and targeted absolute return funds being the most popular sector as many investors left it to fund managers to decide on asset allocation in uncertain markets," says Godfrey.

Overall, net retail sales in June were significantly lower than the same month last year, totalling £1.5 billion compared to £2.2 billion. Institutional sales were negative, with the sector shedding £508 million compared to inflows of £1 billion in June 2014.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.