UK investors sold £983 million of equity funds in July, preferring fixed income and money market funds over equities, property and mixed assets, revealed the latest fund flow index from Calastone.
Despite favourable global stock prices, UK equity funds saw their 26th consecutive month of net outflows in July – the highest since September 2022. With July’s figures, the asset class’s outflows totalled £1.95 billion over the last three months.
Losing £588 million in July – their second-worst month on record – US funds were no exception. Property and mixed asset funds also suffered outflows in July, totalling a net £66 million and £82 million, respectively.
Environmental, social and governance (ESG) funds were the worst hit with £376 million worth of outflows, taking the asset class’s cumulative outflow to £1.02 billion since May.
Reversing the trend, global equity funds (£837 million), emerging markets (£305 million) and specialist technology funds enjoyed inflows. Net selling of European, Asia-Pacific and country funds also accelerated.
According to Calastone, the “AI boom” saw inflows worth £61 million to the small technology fund sector. This category enjoyed four consecutive inflows, following a 15-month period in which almost every month suffered outflows.
Reflecting interest in high yields, fixed income funds enjoyed £347 million inflows in July, though a volatile month for bond yields meant less net buying than June’s £880 million. Investors sold fixed income briefly during mid-July when bond yields fell (and therefore prices rose) but later went back to bond-buying as yields rose again for the year.
“Strong” buying of money market funds drew £403 million in July, attributed to a preference for liquidity amid rising interest rates. Inflows to the asset class over the last six months exceeded those from the previous four years combined, showed Calastone data.
Edward Glyn, head of global markets at Calastone, said: “For now, investors remain very risk averse, choosing the strong rally in global share prices as an opportunity to withdraw cash rather than bank on further gains. With uncertainty over global economic growth and corporate earnings estimates being revised down, attractive fixed income yields have tipped the balance for fund investors away from equities for the time being.
“Money market funds offer even higher short-term returns while policy rates are still climbing, and their low risk means capital values remain very stable should investors wish to switch back to higher-risk assets in future,” he added.
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