Equity fund inflows fell to their lowest level since November 2023 in August due to the short-lived market correction at the start of the month, according to the Calastone Fund Flow Index.
The £545m net inflow marked a 75% fall compared to July. Investors pulled a net £206m from equities in the first three days of August, though this was quickly followed by inflows as investors sought to take advantage of the dip with a net £592m added in the following five days.
When markets bounced back later on in August, some investors chose to take profits with outflows in the second half of the month.
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The impact was felt across most sectors, with global, North American, European and EM fund inflows all down on the previous month.
UK equity outflows doubled to a net £510m, though this was below the £660m monthly average since September 2021.
Edward Glyn, head of global markets at Calastone, said: “The weaker month-on-month figure for UK-focused equity funds should be seen in this context. Not only is the outflow less than the average for the last three years, but it was also less severe than might have been expected given the sharply reduced buying activity across other kinds of equity funds in August.
“It’s not yet time to break out the champagne – the government’s gloomy statements about the UK’s allegedly dire predicament are hardly going to boost confidence – and we are still seeing net selling after all, but two months of better figures for fund flows might herald the start of improving sentiment.”
Bond funds suffer significant outflows
Meanwhile, bond funds suffered significant outflows of £516m, marking the third worst month on record for the asset class. Instead, investors piled into safe-haven money markets, with the £593m net inflow the highest for the asset class since August 2023.
“Investors flinched when global markets convulsed in early August, pushing equity prices worldwide down sharply and hitting magnificent seven tech names in the US especially hard. They initially responded by pulling some cash from equity funds, but there was no wholesale rout,” Calastone’s Glyn added.
“In the first three days of the month, equity fund trading volumes across our network spiked by around a third as nervous sellers took flight while opportunistic buyers simultaneously took the plunge.
“Between them, the elevated levels of selling and buying boosted two-way trade. Outflows turned to inflows as markets calmed and sellers melted away, but nerves have clearly been rattled. What’s more, once markets rebounded, investors chose to sit on the sidelines in the second half of the month, clearly wary of renewed turbulence.”
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