Equity flows dried up in January as uncertainty sparked by the pandemic continued, with inflows falling by nearly 100% month-on-month.
Outflows across all equity funds were said to be sparked by the uptick in Covid-19 as new variants spread adding to the ongoing volatility.
According to data from Calastone, the vaccine-induced “euphoria” that saw equity funds enjoy their second best month on record in December evaporated in January due to the virus.
Inflows into equity funds fell from over £2.5 billion to just £64.6 million through the course of the month.
With the UK in the grips of another lockdown, outflows on UK equities grew to £179 million, marking the eighth consecutive month that investors have turned away from the asset class.
Active equity funds lost nearly all the new capital they gained in December as investors shed around £965 million, having added £1 billion the previous month.
Following months of accelerated inflows, January also saw investors turn away from European funds as they sold down over £140 million
Edward Glyn, head of global markets at funds platform Calastone, said: “The pandemic has increased in intensity in almost all parts of the globe, causing stock markets to falter and investors to curb their enthusiasm for equities.
“Despite the success of its vaccine rollout, the UK market remains firmly out of favour – a new lockdown, severe disruption caused by Brexit and the unfavourable complexion of the UK stock market dominated by slow growing value stocks all make it difficult to construct a compelling buy case for UK shares.”
He added that Europe is also sinking into the “doldrums”, with more outflows expected in the short term.
There was good news on the ESG front, however. Active ESG equity funds enjoyed another strong month, with inflows of £545 million, their third-best month on record.
Meanwhile, bonds saw net inflows to the tune of £1.2 billion.
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