Investment activities were temporarily halted in June due to escalating tensions in the Middle East. So, where did the investors channel their funds during this period?
UK Investors Shift Focus Amid Uncertainty: June 2023 Market Analysis
In a month marked by geopolitical tensions and economic uncertainty, UK investors showed a preference for safer, more diversified investment strategies. According to data from June 2023, a net outflow of £594 million was observed from UK equity funds, a phenomenon that occurs only one month in five over the last 10 years.
Amid the equity dip and increased interest in fixed income, safe haven markets, and passive funds, the most popular funds were primarily focused on short-term money market, global income, and balanced strategies.
Top choices included the Royal London Short-Term Money Market Fund and Fidelity Cash Fund, reflecting demand for safer, more liquid assets during uncertain times. The Orbis Global Balanced Standard, an active global value fund investing in both stocks and bonds, was among the top active funds sought for its balanced exposure and defensive positioning with a tilt toward UK shares, gold, and defense sectors.
Artemis SmartGARP European Equity and Artemis UK Select, both with value or high-growth tilts favoring financials, industrials, healthcare, and select UK companies, were popular among investors looking for selective equity opportunities despite market volatility.
Major investment trusts such as Tiger Royalties & Investments, Greencoat UK Wind, and Scottish Mortgage were also bestsellers in June 2023, indicating interest in income-generating and niche market trusts amid economic uncertainty. Passive and index funds like Legal & General Global Technology Index Trust, Fidelity Index World Fund, and Vanguard LifeStrategy 80% Equity performed well and attracted consistent inflows, reflecting a preference for cost-effective, diversified market exposure during market turbulence.
Elsewhere, bond funds saw a decrease in inflows to £195 million in June, down from £328 million in May. European equity funds saw inflows of £301 million, while North American funds received inflows of £306 million. Money markets saw inflows rise to £218 million in June, up from £85 million the previous month.
The ongoing Russia and Ukraine conflict, tensions between Israel and Iran, and US interventions were factors in June's financial markets. Despite the outflow, the value of buy orders fell by 7.5%, to £11.3 billion, the lowest level since September 2023. The value of sell orders for equity funds fell by 2.5% in June to £11.4 billion.
Investors committed £1.3 billion of new capital to passive funds in June, focusing their selling on active ones. Edward Glyn, head of global markets at Calastone, stated that June was characterized by caution, not fear. The biggest advantage passive funds have over active ones is their low cost.
In summary, the June 2023 environment saw investors favoring short-term money market funds for safety, actively managed balanced and value funds for selective exposure, and passive index funds for broad diversification, aligning with concerns about geopolitical tensions and economic uncertainty. The outflow in June was modest, with a £98 million withdrawal being small in the context of £22.7 billion of total transactions.
- Given the economic uncertainty, UK investors are prioritizing their personal finance by investing in low-cost passive funds, such as those like Legal & General Global Technology Index Trust and Fidelity Index World Fund, for broad diversification and cost-effectiveness.
- Amid the market turbulence, investors are also looking for savings opportunities, with many choosing to put their money in short-term money market funds, like the Royal London Short-Term Money Market Fund, for their liquidity and safety.
- In addition to saving and investing for the short term, some investors are still interested in long-term growth options, particularly in sectors like finance, industrials, healthcare, and select UK companies, with funds like Artemis SmartGARP European Equity and Artemis UK Select being popular choices.
