UK small cap funds enjoyed a bumper April, recording their second highest inflow on record, as investors bet on the domestic economy following the relaxing of Covid restrictions.
Savers poured £240m into the IA UK Smaller Companies sector last month, up from £217m in March, according to data from the Investment Association. This was its highest monthly inflow since the record £279m in December 2019.
UK equities as a whole took in £46m of net retail inflows in April, with UK Smaller Companies’ strong performance offsetting outflows from the UK All Companies and UK Equity Income sectors which lost £65.7m and £128m respectively.
Compared to their large cap counterparts, UK small cap funds have been enjoying a resurgence. Since October 2020 they have posted seven months of net inflows and in 2021 investors have been gradually pouring in more money month-on-month.
Source: Investment Association
Chris Cummings, chief executive of the Investment Association, said: “The overall inflow to UK equities for a second consecutive month follows a sustained period of outflows and points to investor confidence continuing to grow as the UK looks to leave the pandemic economic consequences behind.”
He added: “In particular, the rising inflows to more domestically-focused UK Smaller Companies funds shows investors are increasingly positive that the post-Brexit UK economy will grow strongly as it opens up.”
Europe, which struggled to contain its third wave in April, was the only region to see outflows, haemorrhaging £72m over the period.
Global equities remained the top-selling IA asset class, bringing in net retail sales of £1.7bn.
UK property funds see outflows shrink
Investors continued to be weary of UK property funds, which leaked £21.9m of cash during the period. This was an improvement from the previous two months when the UK Direct Property sector saw £257m fly out the door.
However, the flood of redemptions from property funds could soon see an uptick with the £2bn M&G Property Portfolio re-opening its doors in May after being shuttered for 16-months.
ETFs rebound but inflation jitters hit corporate bond funds
Tracker funds rebounded in April attracting £2.9bn of inflows compared to sales of just £626m in March. This brings tracker funds under management to £269bn at the end of the month and their overall share of industry funds under management to 17.8%.
Meanwhile, the Corporate Bond sector was the worst-seller of the month with an outflow of £263m, on the back of £1.4bn outflows in March as inflation fears lingered.
Despite these concerns, fixed income still saw £1.3bn of inflows, a £230m increase from March, although Equity was the best-selling asset class with £2.9bn inflows.
Responsible funds remained in vogue attracting a net retail inflow of £1.6bn in April, with responsible investment funds under management totalling £72bn as of the end of April taking up a 4.8% share of industry funds under management.
