Equities saw their biggest outflows in September since the aftermath of the EU referendum in 2016, with £1.7bn pulled from equity funds by investors, new data from AJ Bell revealed.

The investment platform said the total outflows for equity funds for the past three months was close to £5bn, with the UK continuing to be hit hardest, although emerging markets did see £270m of inflows in September.

AJ Bell also revealed the UK All Companies sector clocked up almost £500m of outflows, and that the sector had seen just two months of inflows over the past two years – and during that time the FTSE All Share had risen just 8%.

AJ Bell personal finance analyst, Laura Suter, commented: “September was a month where everyone learnt the word proroguing and saw yet more heated Brexit wrangling. Unsurprisingly, this did little to encourage investors to put their backing behind the UK, and we saw £676m of outflows from UK equity funds in the month.

“The tally of outflows since the Brexit vote keeps ratcheting up and is now within touching distance of £15bn – leaving quite a hole in UK fund managers’ portfolios.”

AJ Bell also revealed investors have continued to ditch their investments in smaller UK companies, at a slower pace than previous months – with £61m of flows out of small companies’ funds in September – Suter suggesting this was perhaps buoyed by the turnaround in the market in recent months.

So far in 2019 up to the end of September, however, AJ Bell revealed the FTSE 250 had performed better than the FTSE 100 – gaining by 17% compared to 14% – largely due to a rally in the past two months.

Suter added: “Absolute Return funds continued to be the black sheep of the fund industry, with investors shedding another £200m of the funds in September. Absolute Return managers will be feeling the pinch, as they’ve collectively lost more than £6bn of assets in the past year.

“On average the funds have returned just 3% in the year so far, but the worst performer has handed investors a 21% loss while the top performer has delivered 13% returns.

“After chunky outflows in August investors returned to their love of bonds in September, with Strategic Bond funds clocking up £721m of inflows in the month.

“The Bank of England’s plans on interest rates remain hinged on the outcome of Brexit, so it makes sense that investors are shunning making a call on bonds in favour of outsourcing it to the professionals.”

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