Investors pulled $1.2 billion from UK equity funds in February - Calastone

By Elizabeth Howcroft

LONDON (Reuters) - Investors pulled 962 million pounds ($1.16 billion) from UK-focused equity funds in February, the third-largest monthly outflow on record even as the FTSE 100 hit a record high, funds network Calastone said on Tuesday.

UK equity funds have seen net selling for 21 months in a row, Calastone said. Investors have largely shifted towards bond funds, which saw 834 million pounds of inflows last month.

The FTSE 100 hit an all-time high in early February, boosted by a resurgence of global risk appetite on hopes that inflation was abating.

But worries about the UK economic outlook persist, with the Bank of England forecasting that Britain is set for a shallow but lengthy recession.

"UK investors cannot be persuaded to stick with UK equities, despite their extremely strong relative performance over the last year," said Edward Glyn, head of global markets at Calastone.

"The general air of pessimism over the UK’s economic decline, weak government finances, political chaos and rising corporate taxes seems to have accelerated this trend with consistent outflows from UK funds and inflows to global ones."

Investors pulled 250 million pounds from European-focused equity funds, 368 million pounds from North American equity funds, and 50 million pounds from equity funds focused on Asia-Pacific overall, Calastone said.

Property funds' net outflows fell to 30 million pounds, Calastone said, 18 million pounds lower than in January, driven by a reduction in sell orders.

Still, property funds have seen seven consecutive months of net selling, as property investments are at risk from higher borrowing costs and lower demand from tenants, Calastone said.

Returns on UK property saw their biggest drop since 2008 in the last quarter of 2022, data from MSCI showed in February.

($1 = 0.8312 pounds)

(Reporting by Elizabeth Howcroft; Editing by Sinead Cruise, Kirsten Donovan)