UK investors' stocks sell-off accelerates, ESG 'boom ends' - Calastone

LONDON (Reuters) - Investors in Britain dumped both stocks and bonds in August as they continued to opt for the safety of cash and money-market funds, according to data from fund network Calastone published on Tuesday.

Funds focused on environmental, social and governance issues (ESG) also saw a fourth consecutive month of net selling, down 953 million pounds - taking the total pulled from such funds to nearly 2 billion pounds since May.

Overall, equity funds shed 1.19 billion pounds ($1.50 billion) during the month - the worst since September 2022 - with UK-focused funds hit hardest, with redemptions of 811 million pounds, according to the data.

Fixed income funds also saw net selling of 330 million pounds in August, marking a reversal of fortunes after adding 4.8 billion pounds over the first seven months of the year against a backdrop of rising interest rates.

"Fear was a big motivator in August," said Edward Glyn, head of global markets at Calastone. "With savings interest rates and yields on safe-haven money market funds at their highest level since 2007, it doesn't take much to cause a rout."

Money market funds once again outperformed, adding 673 million pounds - the second highest monthly inflows on record.

Asset managers, which had previously cashed in on a surge in demand for ESG funds, should take note of the developing sell-off, said Calastone's Glyn.

"The move out of ESG funds has gathered pace in a remarkable reversal after the boom in recent years. Four months of outflows signals a new trend emerging that fund houses will have to work hard to counteract."

($1 = 0.7916 pounds)

(Reporting by Iain Withers, Editing by Tomasz Janowski)