Despite a promising start to the year fund inflows dropped sharply in May, with equity fund inflows falling to £775m, their lowest level since November 2023 and two-thirds lower than the January to April average.
According Calastone’s monthly fund flow index, fixed-income and mixed-asset funds saw net outflows.
Meanwhile, safe-haven money-market funds absorbed cash as investors switched out of these two asset classes.
UK-focused equity funds witnessed their second-highest outflows on record in May at minus £1.11bn. May was also the second-worst month for bond fund outflows on record.
ESG equity funds enjoyed their fifth consecutive month of inflows but Calastone noted that buying momentum in the sector is now fading.
Edward Glyn, head of global markets at Calastone, said: “We often see fund inflows subside from mid-April after the ISA season is over, but this year the fall has been more pronounced than usual.
“The prospect of interest rate cuts in the US and the UK has receded yet again, with only the ECB likely to move in the short term.
“Bond yields are approaching once more the post-GFC highs they reached in late 2023, pushing down bond prices as they have climbed.”
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