11 April 2019

Financial Times: Investors flee UK stock funds on Brexit worries

Investors withdrew $304.5m from funds that invest in UK shares for the week ending Wednesday, extending the total for the year past $1bn and to $24.8bn since the vote three years ago, according to EPFR Global data.

“The continued uncertainty and a cloudy road map on Brexit and what it will mean for trade relationships and corporate earnings are leading to outflows,” said David Donabedian, chief investment officer of CIBC US Private Wealth Management. “Investors, both domestic and international, are looking for other places to grow their money.” [...]

Despite the negative news, the FTSE 100 index of blue-chip UK stocks gained 10.3 per cent in the first quarter. This had created a disconnect between the negative prospects for the UK’s economy after Brexit and current corporate performance, said Max Gokhman, head of asset allocation for Pacific Life Fund Advisors.

“It’s still very likely this doesn’t end well. If I look at all the negative developments and then look at positive returns for the FTSE 100 this year, it looks like good news is priced in,” Mr Gokhman said.

This could be setting investors up for dismal returns once the reality of Brexit — and the UK’s diminished prospects as a trading partner — set in, he said.

“Prices are telling you everything is fine, but fund flows are saying everything is not fine,” Mr Gokhman said. [...]

Full article on Financial Times (subscription required)

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