Calastone: Equity flows positive for first time in half a year

Improved market sentiment and rising prices tempted UK investors back

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Equity funds saw positive net flows for the first time in six months in November, according to Calastone’s latest report.

Improved market sentiment and rising prices tempted UK investors back into stocks, with £449m of inflows in the month.

This represented just under one tenth of the net £4.54bn total withdrawn between May and October.

The gains were not split evenly across asset classes, with emerging market funds seeing record inflows of £414m, while North American funds booked £481m, global funds saw £802m of net new money and Japanese funds also reported a strong number at £111m.

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These were counterbalanced by continued net outflows from Asia-Pacific, Europe, UK, income funds and infrastructure.

On the fixed income side the picture also improved, as falling yields helped encourage ‘modest’ net inflows for the first time, with £256m coming in, in aggregate.

Despite the approach of COP28 in Dubai, investors continued to pull money from ESG equity funds in November, as they suffered their seventh consecutive month of outflows at £524m. This took the total since outflows began in May to £3.7bn.

Mixed asset funds continued to struggle as correlated markets made investors question their value, according to Calastone. They suffered a record outflow of £1.6bn.

Edward Glyn, head of global markets at Calastone commented: “Investors are intent on both trying to plot the likely path central banks will take with short-term interest rates and on how much risk to price into longer-term bonds.

See also: Are US equities overvalued, or are valuations just high?

“This in turn determines both their assessment of how the economy is going to fare and their calculations for asset prices of all kinds. November saw good news on inflation in the US, the UK and in Europe which investors increasingly hope will stay the hand of policy makers deciding on the next move for rates. Inflows to fixed income reflect investors trying to lock into yields at 15-year highs and hoping for capital gains from here on.”

He added that “perkier bond markets are good for equities too”. “Equity prices duly rebounded during the month, pushing the global index within a whisker of its high point for the year.

“But it’s clear investors are very cautious. There is a lot of concern that higher interest rates have not yet taken their full effect to suppress demand, which would impact company profits and therefore share prices.”

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