UK investors pack up and leave property for global equities

Added 28th June 2016

UK retail investor behaviour post-Brexit reveals growing fears about the prospects for property and UK equity funds and a growing preference for global and Japanese equities, according to analysis by Rplan’s online investment platform.

UK investors pack up and leave property for global equities

During the weekend after the EU referendum, Rplan said it saw a 175% uptick in trades on its online platform relative to the previous weekend. The online investment company noted that 76% of withdrawals the weekend after Brexit were from property funds and 22% were from UK equity funds.

The volume of switching between funds was 4.5 times higher than the previous weekend, the firm said.

“UK investors’ fears about the prospects for property are striking,” said Stuart Dyer, chief investment officer at Rplan. “Clearly, there are worries that property would be affected by a possible economic downturn and the withdrawal of foreign investors.”

“But investors should not be too hasty in making decisions about the consequences of Brexit,” he added. “Property and other asset classes have their roles to play in a balanced portfolio invested for the long term. Diversification helps to reduce both the impact of volatility and risk.”

Regardless, retail investors have put their money where their mouth is and are increasingly pulling away from property and UK equity toward global and Japanese equities, in particular, said Rplan.

Post-Brexit, 56% of investors on Rplan’s platform bought global equities, followed by Japanese equities (20%). UK equities were the third most popular sector purchase at 16%, likely a result of the devaluation of sterling. Just 5% of investors purchased North American equities.

In the month prior to the Brexit vote, Fidelity International’s FundsNetwork said investors’ flight to safety was evident from overall fund sales, which included fixed income funds like the AXA Short Credit Duration Fund and the Baillie Gifford Investment Grade Long Bond Fund among the bestsellers.

The corporate bond and UK money market sectors also saw a surge in popularity during May, FundsNetwork said.

“With pre-referendum uncertainty dominating investor thoughts, it is no surprise that we saw them pile into the relative safety of fixed income and the money market sectors in an attempt to shield their portfolios from the volatility,” said Danny Wynn, head of fund partners for Fidelity International.

In the short-term, post Brexit, Wynn said he expects market volatility to continue to deter investors from buying UK equities but suspects this trend is subject to change.  

“While it’s likely we’ll see investors continue to adopt a risk off approach and allocate towards safe haven assets following the UK’s decision to leave the EU, once the dust settles and the initial volatility recedes we expect to see advisers and investors  re-enter equity markets looking for value. As a result there is a possibility we could see investors making some tactical allocations into more diverse range of assets over the next few months,” he remarked.

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