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Investors have withdrawn almost £4bn from Liontrust’s UK-focused funds over the past year in another sign that domestic equities are under pressure as London’s markets grapple with capital outflows.
The FTSE 250-listed fund group reported on Wednesday that customers had pulled a net £6bn from its funds over the year to the end of March, the bulk of which was from its UK equity products. That compared with £4.8bn pulled over the same period the previous year.
The flows come as a blow to Liontrust, which manages most of its customers’ money in UK stocks. The group has also suffered a difficult year in which its takeover of rival fund group GAM collapsed, while its share price has dropped by almost a third.
Liontrust’s latest figures are another sign that UK equity markets are struggling as investors continue to shift capital to international stocks in search of higher returns. Funds that invest in UK companies have had 34 straight months of outflows, according to research by investment bank Peel Hunt. This has reduced valuations for British stocks and made some groups question the rationale for being listed, contributing to a dearth of initial public offerings on the London market.
“We remain confident that when sentiment towards the UK market shifts positively, Liontrust will be a disproportionate beneficiary,” said Rae Maile, an analyst at Panmure Gordon. “Stronger markets and improved investment performance are useful to encourage future flows more widely, in particular into UK equities.”
Shares in Liontrust jumped more than 5 per cent in early morning trading, which Maile said “reflects stronger markets but also the efforts the company has been making to position itself for a return to inflows”. Liontrust’s total assets under management fell more than a tenth over the year to £27.8bn.
However, David McCann, analyst at Numis, said there was “a lack of obvious strategy or catalyst to return the group to net inflows”.
Analysts have speculated over whether Liontrust is on the hunt for another takeover to bolster the business in the wake of its outflows.
Liontrust had engaged in early-stage conversations with UK-focused asset manager Artemis about a potential takeover last month, the Financial Times revealed, in a possible attempt to boost its UK equities franchise.
The group’s bid for GAM fell through last year after the Swiss asset manager’s shareholders rejected its takeover approach.
John Ions, chief executive of Liontrust, admitted that the company had grappled with “challenges” over the past 18 months, but noted that its funds’ investment performance was improving and that interest rates had potentially peaked.
“This follows a period in which many of our core investment strategies . . . have been out of favour, impacting both performance and flows,” he added, pointing to its growth, small and mid-cap, and broader UK equity funds.
