UK investors continued to place confidence in equities during April, as net £1.4bn flowed into the asset class across the month, up considerably from £960m in March. However, there are concerns that this optimism could be “fragile”.
Not since May 2021 have monthly equity inflows been so high, according to Calastone’s monthly Fund Flows Index, but its head of global markets Edward Glyn said the outlook was still murky.
“Company profits are under pressure and there remains a lot of uncertainty over the likelihood and severity of any potential economic downturn.
“The resurgent optimism is therefore rather fragile,” he said.
Fragile or not, the optimism is clear to see in April’s fund flow figures. Global funds had their fourth-best month, as investors injected net £1.6bn, and emerging markets saw £364m of net inflows, the third most on record (behind March this year).
The Fund Flow Index also found that even North American equity funds, which have suffered from £2.08bn of redemptions in the last nine months, experienced net inflows of £253m. This came despite the banking sector wobble that the country has endured over the last two months.
The report added the “resurgent” interest in North American equities was also reflected in the first net flows into specialist technology funds since August 2022.
Glyn said this was expressive of a rising risk appetite amongst investors:
“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.”
Glyn added low valuations, and the benefits of a weakening dollar, also attracted investors to emerging markets.
Despite the growing appetite for equities, the UK remained decisively ignored by domestic investors. Outflows gathered pace in April, rising to £782m and marking 23 consecutive months of net selling.
Redemptions from UK funds now total £13.86bn since June 2021, with internationally-focused funds receiving net £13.93bn in the same period.