In October, Germany, France and Belgium announced new COVID-19 national lockdowns, with England following suit shortly after. According to data from Calastone, these announcements had a huge impact on UK equity funds, with investors pulling £358m of investment out of funds in this category.
This continued a trend seen in previous months, with £1.2 billion removed from UK equity funds in June, July and August combined.
So, why are investors selling, and is now a good time to sell?
Why investors are selling UK equity funds
According to Edward Glyn, head of global markets at Calastone, the mass exodus from UK equity funds – despite mainland Europe suffering similar lockdowns – is two-fold.
“Investors view the double whammy of COVID-19 and Brexit as uniquely damaging for Britain”, he says.
Alessandro Dicorrado, co-manager of Ninety One’s UK Special Situations fund, agrees that Brexit is to blame. “There’s an element of global investors just not wanting to bother with the economic uncertainty of the UK, which you can understand”, he says.
However, not everybody agrees that selling is the only current option.
Should I sell my UK equity fund holdings?
Sue Noffke of Schroders believes that, with a long term view on investing, UK equities do not look all that bleak. She tells of how some companies have resumed dividend payments, while others are revealing new investment plans and M&A proposals. In this article, she offers a number of reasons to be positive about the recovery of UK equity funds.
Laura Suter of AJ Bell agrees. She highlights that a temporary suspension of dividends should not affect returns in the long run – and points out that many businesses have actually pledged to continue paying dividends.
Essentially, while things may currently be looking bleak for UK equity funds, the decision of whether or not to sell will depend on many factors – including whether an investor is relying on regular dividend payments as a source of income, or whether they are willing to play the long game and wait for the market to bounce back.
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