- Outflows from UK-focused equity funds totaled £665m last month, data claims
New all-time highs hit by the FTSE 100 index have failed to stop the flow of cash fleeing UK share funds.
Outflows from UK-focused equity funds totaled £665 million last month, taking the total amount of capital withdrawn to £21.3 billion over thirty-five consecutive months of sales, according to the latest Fund Flow Index by Calastone.
On Tuesday, the FTSE 100 closed at an all-time high of 8,313.67. The index has recovered after a slow 2023, which was hit by rising interest rates and economic uncertainty.
UK outflows: Outflows from UK-focused equity funds amounted to £665 million last month, Calastone said.
Over the past week, shares in major banks, including Barclays and Lloyds Banking Group, have performed well, rising more than 3 per cent on Tuesday.
According to Calastone’s latest April data analysis: “The relentless negativity in UK-focused equity funds did not abate, despite the UK market hitting a record high.”
UK investors added a net 1.93 billion pounds to equity funds and 422 million pounds to bond funds in April, Calastone said.
More than half of the inflows into equity and bond funds took place in the first five days of April, just before the fiscal year ended.
Data: Net flows of equity funds since the first quarter of 2021
From mid-February to the end of the financial year, UK investors poured £5.17bn into funds, more than five times more than the same period a year ago and the highest level since Calastone records began.
British investors continue to prefer US stocks. Net inflows into North American equities reached £1.25bn in April, the fourth best result on record for Calastone.
Global and European stocks soaked up £1.49bn and £471m respectively last month. In fact, global funds had their best month since April 2023, when inflows into this category reached £1.59 billion.
Flows: Isa seasonal equity fund net flows since 2019
Since January 2023, equity index funds, led by North American and global funds, have received £14.92 billion in cash from investors, while active funds have lost £7.26 billion.
Index funds proved particularly popular last month, as they have for the past 16 months, the findings added.
Investor appetite for emerging market funds appeared to wane. According to Calastone, UK investors broke an 18-month streak of capital inflows by selling a net £162m of their emerging market holdings.
Money market funds also fell from favour, enduring outflows of £100m in April. This marked the first month of net sales of this asset class since January 2023.
Calastone said: ‘Investors are moving directly from safe haven money market funds, despite current high yields, into riskier asset classes. Real estate funds, facing cyclical and structural problems, also experienced continued capital outflows.’
Edward Glyn, head of global markets at Calastone, added: “The 2024 bull run in equity markets runs counter to uncomfortable bearish signals coming from bond markets.
‘Inflation in the US, UK and elsewhere remains stubbornly above target and resists high interest rates, meaning they will stay high for longer.
‘That’s bad for asset prices of all types, and global stock markets faltered in April, falling nearly four percent from their peak.
‘However, they remain close to the record high reached earlier in the month, making some markets, particularly the United States, look expensive. Investors seem unfazed.
