UK investors dipped a toe back into the market in March with net inflows of £446m across the IA universe after pulling £1.1bn out in January and an additional £2.7bn in February, the Investment Association reported.
Despite the rocky environment for flows to start the year, US equity inflows have expanded by £1.5bn in the first three months of 2024, over double the £625m in flows for the final quarter of 2023.
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Miranda Seath, director of market insight & fund sectors at the Investment Association, said: “Inflationary pressures eased towards the end of 2023, and alongside expectations of interest rate cuts, this resulted in a more optimistic outlook among investors.
“While inflation continues to fall, expectations of rate cuts have been scaled back quite dramatically in April, following recent data that suggests inflation will take longer to fall back to target levels. It remains to be seen how investors will react to this, which coincides with continued geopolitical tensions.”
By sector, global had the strongest performance in March, attracting £842m in net retail sales. North America followed at £469m and volatility managed came in third with £344m. On the other end of the spectrum, UK all companies lost £887m in the month.
“North America equity funds performed particularly strongly in the first quarter of the year with high inflows of £1.5 billion born out of stronger growth rates in the US,” Seath said.
“The dominance of the ‘Magnificent Seven’ stocks, as well as the Federal Reserve’s monetary policy decisions helping to tame inflation, which has fallen faster in the US than in the UK and Europe.”
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Asia, Europe and the UK all felt outflows in March, at £71m, £158m, and £1.3bn, respectively. Japan managed to stay in the green with £145m in inflows.
In total, funds under management have increased since a year ago, hitting £1.47trn in March 2024 versus last year’s £1.38trn.
“Markets have not yet wobbled at escalating geo-political tensions and there are growing signs of investor confidence boosted by sales bump as investors look to top up their ISA allowances before the end of the tax year,” Seath said.
“As equity performance improves, particularly in the US we have seen Funds under management rise: FUM is up 3% in Q1 and 11% from the recent low at the end of October.”
