UK investors made the most of the ISA tax deadline in April with equity inflows up five times on the same period last year, according to the latest Fund Flows Index from Calastone.
A net £1.9bn was added to equity funds in the month, while £422m was placed into fixed income strategies despite falling bond markets. More than half the month’s inflows to the two asset classes took place in the first five days of April as retail investors used up their ISA allowance.
In terms of cumulative inflows during the whole ISA season from the middle of February to the end of the tax year, equity funds absorbed £5.2bn, more than five times as much as the £981m in 2023 and better than any year on Calastone’s record.
By region, North American equities enjoyed their fourth-best month for flows on record with £1.25bn added to funds in the sector. Global and European equities also enjoyed strong net inflows of £1.49bn and £471m.
Despite the FTSE 100 reaching a record high in April, net redemptions continued in the home market totalling £665m, taking cumulative outflows to £21.3bn in 35 consecutive months of selling.
Appetite for emerging market funds also fell, with the £162m net outflow breaking an 18-month run of net inflows.
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“The 2024 bull run in equity markets flies in the face of the uncomfortably bearish signals coming from the bond markets. Inflation in the US, the UK and elsewhere remains obstinately above target and resistant to high interest rates – meaning they are going to stay high for longer,” said Edward Glyn, head of global markets at Calastone.
“That is bad for asset prices of all kinds, and global equity markets faltered in April, falling almost four percent from the peak. Nevertheless, they remain close to the record high reached earlier in the month, leaving some markets, particularly the US, looking expensive.
“Investors seem undeterred. Inflows may have slowed a touch, but they are still well above normal levels as investors chase stock prices – the outflow from money market funds is part of this trend. Meanwhile inflows to bond markets show that steady and accumulating losses are not deterring new capital – this is not unreasonable as there are substantial gains to be made when interest-rate expectations turn a corner and high yields mean investors can lock in historically high income levels now for the long term.”
Meanwhile, multi-asset funds enjoyed their first month of inflows after 11 consecutive months of net selling, with £313m flowing into the asset class. However, the asset class recorded outflows for the rest of the month following the ISA allowance deadline.
There were also signs investors are ditching safe havens such as money market funds, with the asset class suffering an outflow of £100m in April. This was the first month of net selling since January 2023.
