Investor sentiment towards equity funds warmed in March, as £960m of net inflows hit the sector according to Calastone’s Fund Flows Index.
The monthly report said UK investors shrugged off the collapse of Silicon Valley Bank, and the demise of Credit Suisse, to give equity funds their highest inflows since December 2021.
Global funds reaped the rewards of renewed investor confidence, receiving £1.7bn, their best monthly total since November 2021 and their third best on record. Emerging markets, with £393m of net inflows, also performed strongly, and fixed income finished March with £683m of net new investor money, capping a record quarter for the asset class in terms of flows.
Same sorry story for UK equity funds
Global funds became the largest category of funds under management in the UK in December 2020, overtaking UK equities as the largest sector according to Edward Glyn, head of global markets at Calastone.
Glyn added that since that time, Calastone’s figures have shown net flows of £23bn into the sector, while UK equity funds have suffered outflows of £12.1bn.
“This mismatch has enabled global funds to retain the top spot in terms of assets under management, despite having performed significantly worse than UK equities over the last two years,” he said.
From the beginning of 2022 to the end of March this year, the UK All Share has posted a return negative 2.5%, compared to negative 14.7% from the MSCI World.
March told a similar story, as net £747m flowed from UK-focussed equity funds. This was marginally lower than the average monthly outflow of £888m between November 2022 and February 2023, but March still marked 22 consecutive months in which investors pulled more money than they put into the sector.
Glyn said: “The relative strength of UK equities since the bear market began just over a year ago has not improved sentiment. If anything, we have seen outflows accelerate, which on the face of it seems surprising.
“Yet the large share of UK-focussed funds in investor portfolios makes them an obvious source of cash for those keen to reduce overall equity exposure, while the increasing perception of the London stock market as an investment backwater, along with the political and economic difficulties the country has been facing, have kept the pressure on to rebalance holdings away from UK shares.
“A period of strong performance by UK equities, after years missing out on the global bull market has clearly provided an opportunity to cash out.”
