UK equity funds enjoyed a resurgence in July as low interest rates and cash savings prompted a flood of new money during the typically quiet summer lull.
After two months of net outflows UK equities saw a reversal of fortunes during the period, raking in £245m, making it the second-best selling region behind Global (£1.2bn).
Higher sales were driven by UK All Companies funds, which attracted £295m from retail investors, offsetting net redemptions from UK Equity Income (-£46.5m) and UK Smaller Companies (£-3.6m).
Though July marked UK equity income funds’ 14th consecutive month of net outflows, money exiting the sector has slowed dramatically from £231.6m in June, which IA chief executive Chris Cummings (pictured) put down to the UK’s improving dividend picture.
Retail fund flows nearly triple in July
In total savers ploughed £4.8bn into funds in July, nearly three times higher than a year ago and slightly up on June’s net inflow of £4.4bn.
“Typically, we experience quieter months for net retail sales over the summer period, but this year we have seen consistent and robust inflows through June and July, which speaks to investor confidence being maintained and no rush to spend the savings accumulated during the crisis,” Cummings said.
“We are still early on in the inflation story and have not yet seen any moves away from persistent low interest rates, which makes cash saving less attractive and has potentially helped fund flows in the near term.”
July’s healthy net flows take total sales for the year to £28.9bn, said AJ Bell head of personal finance Laura Suter.
“As interest rates on cash accounts remain historically low and many people sitting on a healthy cushion of savings from the pandemic, we’d expect to see more and more money funnelled into investments this year,” Suter said.
Global tops sales charts while UK property redemptions continue
For the second month running the IA Global sector was the top selling sector, netting £862m in July, bringing total flows to £7.7bn for the year-to-date.
The IA Mixed Investment 40-85% Shares sector was the next popular with net flows of £648m, followed by the Volatility Managed and Short Term Money Market sectors, which in £509m and £416m respectively.
On the opposite end, Corporate Bond and Global Emerging Markets Bond local currency were the worst sellers of the month, losing £205.1m and £133.3m. Investors also avoided the North America and Targeted Absolute Return sectors which each lost around £57m.
UK property funds also continued their losing streak with investors yanking another £42.4m from the sector.
Suter notes the IA UK Director Property sector is just two months shy of having three straight years of monthly outflows.
“While the residential property market has been going gangbusters during the pandemic, that hasn’t translated into people’s investment portfolios,” she said. “The lock-ups in the funds, concerns about liquidity and subsequent closing of some funds means it will be a long time before we see inflows to the sector. On top of that, FCA plans to potentially bring in a notice period for the sector could well be the final nail in the coffin, with the majority of investors saying it would put them off investing.”
