Investors have withdrawn $4.2 billion from U.K. equity funds since Theresa May stepped down as prime minister and the possibility of Britain leaving the EU without a deal in place became more plausible, the Financial Times reported, citing data provider Emerging Portfolio Fund Research Inc., or EPFR.
Meanwhile, outflows since the U.K.'s 2016 Brexit referendum now total $29.7 billion, the report said.
According to Copley Fund Research, portfolio managers in charge of 250 global equity funds — with $450 billion in assets — have pulled approximately $2.0 billion from the U.K. since March and lowered their U.K. exposure to about 7.9% on average, according to the FT.
"We're seeing a marked shift out of Britain and into mainland Europe by international fund managers," Copley Fund Research CEO Steven Holden told the FT.
Invesco Ltd.'s global market strategist, Arnab Das, said investors were increasingly pricing in the possibility of a no-deal Brexit. Man Group Ltd. CEO Luke Ellis, meanwhile, said investors have put the U.K. into the "too hard to think about basket" and Neil Dwane, chief strategist at Allianz Global Investors, said the U.K.'s stock market was "unloved, under-owned and cheap" and that Brexit has made investors cautious and the uncertainties around it will get in the way until it is resolved.
The fear around Brexit concluding without a deal in place has also soured investor appetite for U.K. property funds which saw net withdrawals of £410 million in July — the highest monthly outflows since January, the report said, citing Bhavik Parekh, an associate analyst for manager research at Morningstar Inc.
About £1.9 billion has been withdrawn from property funds over 12 months to the end of July, the FT noted, adding that the outflows peaked during times of increased Brexit uncertainty like the original March 29 deadline.
The newspaper also said that the heavy outflows have heightened fears of a potential liquidity crunch similar to the one after the 2016 Brexit referendum, which caused property funds to suspend trading. The situation has spurred the U.K. regulator to demand daily updates from asset managers in a bid to avert a repeat of that era.
