The global financial market has been faced with investment uncertainty given a number of unanticipated events over the past six months. For UK investors, the risk of losing money and seeing large fluctuations in the value of their holdings seems to have prompted a change in sentiment and a movement towards safer assets.
Following the UK’s vote to leave the EU, Cofunds, the UK’s largest investment platform, has revealed demand for UK equity has fallen. Gross sales for the second half of the year decreased by 35% compared to the same period in the previous year.
The initial shock of the outcome was also damning for the property sector, as investors rushed to withdraw assets. In order to manage large-scale redemption risks, fund houses suspended trading among many commercial property funds. In total, the property sector experienced a 60% reduction in gross sales on Cofunds since the referendum vote.
Donald Trump’s shock US election victory was another turn-up for the books. With polls indicating Hillary Clinton as a clear favourite, pundits and the public alike were not expecting Trump would make it into the White House.
Although the markets reacted positively to the news, it appears investors are less confident that Trump will have a positive impact on the American economy. Cofunds saw a reduction of new business in the North American sector decrease by 20% since the election result was announced.
Political changes had little impact on the European sectors; although original expectations for higher returns slowed, Europe Excluding UK sector saw a small 4% decrease in proportional gross sales.
Despite bounce backs in the stock market, volatility continues to unsettle investors, and as a result, Cofunds has seen an increase of flows into what could be deemed safer assets. Popularity for fixed income products has increased following market uncertainty, with the corporate bond sector seeing a 42% increase in gross sales.
Cofunds’ head of Fund Manager Relations, Britt Holland-Ellice commented on the findings: “The general trend suggests that given recent political outcomes, clients have opted to avoid potentially volatile areas, place money into lower risk investments and in some cases hedge against a fall in market value. This has been illustrated on the Cofunds platform with gross sales reducing among the UK and American sectors. In turn, investors have been looking to diversify their portfolio, resulting in sectors such as global seeing a 30% increase in gross sales following the political changes.”