Equities funds were hit by a fifth consecutive month of outflows in September, according to the latest Fund Flow Index from Calastone.
Outflows from equities slowed though, with the £206m that was pulled being the least since February this year.
Once again, UK equity funds shed the most money. Redemptions of £448m made September the 28th consecutive month of outflows for the sector.
Investors withdrew a net £285m from the much smaller North American fund sector, meaning that they saw a bigger outflow on a relative basis than UK-focused funds.
Income funds also suffered significant outflows, with £594m in withdrawals representing their second-worst month of the year after August.
ESG funds suffered a fifth consecutive month of outflows, with investors pulling £485m, almost half of which came from North American ESG funds.
See also: Unexpected fall in inflation opens door to Bank of England rate hold
Global funds remained a bright spot within equities and attracted £981m of new capital in September.
Emerging markets funds continued on their best run since Calastone’s recording began. Investors added £284m in September, taking the year-to-date total to £2.39bn.
Fixed income and multi-asset funds both saw significant outflows in September. There was £128m pulled from bond funds, while multi-asset products shed a hefty £1.04bn.
Money market funds attracted new capital again, with a net £189m being pulled in.
See also: Are US equities overvalued, or are valuations just high?
Edward Glyn, head of global markets at Calastone, commented: “The bond markets are in the driving seat at the moment. One moment, inflation coming in better than expected or central banks hitting pause on interest rates causes a bond market rally.
“The mathematical alchemy that links bond yields to stock market valuations, as well as investor hopes for a soft economic landing, give equities a boost,” he continued.
“The next moment, policymakers take the punchbowl away with a warning that rates will stay high for the foreseeable future – bond yields surge and equity markets sag. Clear signs of sustained disinflation accompanied by a definitive turn in the rate cycle seem to be top of the wish list for market bulls at present.
“The distaste for UK equities is a structural trend that domestic and international investors are unwilling to break, despite attractive valuations, but outflows from North American funds only began in earnest with the bear market in 2022.”
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