Equity funds enjoyed their best six months on record in the first half of 2024, taking in £11.4bn of new money, according to the latest data from Calastone.
US and global equities were most popular among UK investors, with funds raking in £7.8bn and £7.6bn respectively this year.
However, they were less confident in their home market, removing £3.8bn from funds investing in UK equities.
Although outflows are ongoing, the amount that investors are cashing in is shrinking. Investors took out £522m in June – the smallest amount so far this year.
The trend is reversing elsewhere too, with US equity funds losing £0.6m throughout the month despite performance remaining strong. Over the past six months, the IA North America and IA Global sectors are up 12.2% and 8.2%, respectively.
Edward Glyn, head of global markets at Calastone, said flows in the second half of the year are dependent on central banks.
“Hopes for cheaper money after the painful rate squeeze of the last two-and-a-half years are the clear driver of record flows into equity funds so far this year,” he said. “The US market valuation is not cheap, however, and this means investors are hoping that earnings growth will deliver, as the prospect for multiples to expand further is surely limited at present.
“By contrast, large markets such as the UK and Europe are trading on less challenging valuations, while many emerging markets are set to benefit from the weaker dollar and a nascent commodity boom.”
The prospects of rate cuts led to a “sharp drop” in bond prices in June, and this was reflected in fixed income fund flows. Investors removed £471m throughout the month – and £1.1bn over the past two months – which Glyn found “harder to understand”.
“If investors truly believe rates are coming down and will stay low, then there are capital gains to be made in the bond markets,” he said. “Perhaps the allure of equities simply looks too strong at present.”
See also: Rathbones: UK equities viewed as ‘extremely cheap’ by industry
