UK equity funds had net outflows in August, but net selling continued to be less severe than recent times.
Broader equity fund inflows fell by three quarters compared to July, but were positive at £545 million because investors generally “bought the dip”, said Calastone, the transaction platform that produces the Fund Flow Index.
Market convulsions seen in August caused modest net selling in first three days of the month, but this was followed quickly by inflows, noted the firm, and inflows dried up once stock markets recovered.
Other data showed fixed income funds saw outflows “surge” to -£516 million, the third worst on Calastone’s records, despite gains in bond prices, and that safe haven money market funds saw the largest inflows in a year at £592 million.
The situation with UK-focused equity funds was one of rising outflows once again after July had seen their “least-bad month” in three years. Net selling of £510 million was more than double the July total, but this was still well below the £660 million monthly average since outflows began in earnest in September 2021.
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Edward Glyn, head of global markets at Calastone, said: “Investors flinched when global markets convulsed in early August… In the first three days of the month, equity fund trading volumes across our network spiked by around a third as nervous sellers took flight while opportunistic buyers simultaneously took the plunge. Between them, the elevated levels of selling and buying boosted two-way trade.
“Outflows turned to inflows as markets calmed and sellers melted away, but nerves have clearly been rattled. What’s more, once markets rebounded, investors chose to sit on the sidelines in the second half of the month, clearly wary of renewed turbulence.”
He said the weaker month-on-month figure for UK-focused equity funds should be seen in this context. Not only is the outflow less than the average for the last three years, but it was also less severe than might have been expected given the sharply reduced buying activity across other kinds of equity funds in August, said Glyn.
