UK investors put £1.4bn into equity funds in April, the most they have invested in stock portfolios since April 2021, according to data from Calastone, but UK funds continue to miss out.
The main beneficiaries were global funds, which took in the most new money with £1.6bn added to the sector – the fourth highest on record – while there was also renewed interest in US equity funds (£253m) despite fears of a banking collapse following the demise of Silicon Valley Bank, among others. It claws back some of the £2.1bn worth of cash that left these portfolios over the preceding nine months.
Edward Glyn, head of global markets at Calastone said: “Global funds are typically the first go-to for new cash. Meanwhile, the sharp turnaround in interest in North American and specialist tech funds reflects the strong response of growth-company share prices to falling long-term bond rates.”
Despite the move to risk-on and the enthusiasm for stocks over safe havens, investors were not convinced by the UK, which again experienced outflows.
Withdrawals actually rose in April, with £782m leaving these portfolios, the 23rd consecutive month of net sales, raking the total sold since June 2021 to £13.9bn.
Instead, investors have been buying internationally-focused equity funds, which have enjoyed inflows of £13.9bn over the same period.
Source: Calastone
Volumes were down last month, the report noted, as the flurry of activity in March ahead of the ISA deadline died down, with the total value of buy orders plummeting 19.5% from £24.9bn to £20.0bn.
Glyn said: “Capital markets largely traded sideways in April after a strong March – yet fund flows show risk appetite is on the rise.”
Alongside global and US funds, emerging market portfolios proved popular, with investors putting in £346m to this region, the third highest on record.
There were also inflows for Asia funds, while technology specialist funds had their first month of inflows since August 2022.
“Emerging markets hold a number of attractions at present. They tend to benefit when the dollar weakens; valuations are low relative to developed-market counterparts; investors are under-allocated to them; and the rate-tightening cycle is ending sooner in emerging countries that took swifter action against inflation,” Glyn said.
Joining the UK in the net outflow column were European equities, although the outflows from the region shrank to their lowest since March 2022, while property funds were also sold off last month to the tune of £24m.
Glyn noted that the coming months remain fraught with uncertainty and that the recent optimism could prove to be “rather fragile”.
“The horizon is not unclouded however. Company profits are under pressure and there remains a lot of uncertainty over the likelihood and severity of any potential economic downturn. Indeed, markets plunged at the beginning of May as US banking failures continued,” he said.