Investors have poured more than £50 billion into offshore funds following the Brexit vote, according to transaction network Calastone.
The firm’s new Fund Flow Index (FFI), which incorporates data gathered from the network’s users, shows that since June 2016 a total of £53.1 billion has flowed offshore, or an average of £1.9 billion per month.
From early 2015 until May 2016 the FFI Offshore index averaged 50.5, suggesting that flows to offshore funds were matched by flows into the UK, but since June 2016 this has risen to 55.8 (see graph below) – representing significant net inflows to offshore funds.
Calastone managing director and head of global markets Edward Glyn said: ‘The sea change in appetite for offshore funds is clearly linked to Brexit: the expected loss of passporting for the UK’s financial services industry, coupled with uncertainty about the UK’s regulatory future, and nervousness about Britain’s unstable political situation, have driven investors to move capital outside the country.’
Most offshore fund flows across the firm’s networks are from institutional investors, while among retail investors the high value of individual transactions suggests that offshore funds are favoured by wealthier individuals.
However, the average size of each transaction has been falling, suggesting that less wealthy investors are increasingly moving money offshore as well.
The value of net flows offshore has declined over the last three months, with Calastone attributing this to investor anxiety about financial markets rather than a reversal in the trend.
The FFI showed investors sentiment as falling to its lowest level since late 2016 in October, with only £1.1 billion net flowed into funds on unusually high trading volumes – one third of the year-to-date average.
In October, figures from the Investment Association showed total outflows from UK equity funds since the Brexit referendum had reached £10 billion.