Inflation fears and low interest rates see investors pour record £5bn into funds in August… but UK stocks remain unloved
- Savers turned to funds over the summer against a backdrop of rising inflation
- Investors poured a £5.3billion into funds, a record amount for August
- Interest in UK shares continues to plummet, with outflows of £354m
Investors continued to pile cash into funds with inflows exceeding £5billion through August, according to the latest data from the Investment Association (IA).
Savers are opting for funds against a backdrop of rising inflation and low interest rates.
Record fund sales of £5.3billion in August surpassed July’s inflows of £4.8billion, bringing the total amount invested in funds from June to August to £14.5billion.
Savers poured over £5billion into funds in August, with the IA’s global sector remaining the bestseller
However, appetite for funds holding UK shares continues to fall partly because of pandemic uncertainty and the effects of Brexit, but also a longer trend of higher allocation to global equities.
The worst selling IA sector in August was UK All Companies with outflows of £354million.
‘The twin headwinds of Brexit and coronavirus means sentiment towards the UK remains divided. Investors should be careful not to write off the domestic market however, as the uncertainty has created some good value opportunities,’ said Emma Wall, head of investment analysis at Hargreaves Lansdown.
But it seems misery for UK equities is not set to let up any time soon.
Data from funds network Calastone also published today show investors have continued to sell off UK equities into September. Savers sold down a net £567million last month, the second worst month for UK equities after June 2020.
Active UK-focused equity funds bore the brunt of the sell-off, accounting for 98 per cent of the total outflow from UK funds.
‘The petrol panic, soaring inflation, empty supermarket shelves, fractured supply chains, crippling staff shortages and turmoil in gas and electricity markets are all taking their toll on investor confidence,’ said Edward Glyn, Calastone’s head of global markets.
‘With so much going wrong so quickly, investors have voted with their feet and dumped UK assets. Investors know that other parts of the world are also experiencing some of these difficulties, but inflows to funds focused on other regions emphasise that they realise the problems are more widespread and more acute in the UK than elsewhere.’
While investors withdrew their cash from UK equities, other IA regions enjoyed healthy inflows.
Global funds remain the best-selling IA equity fund region sector for the sixth time this year with net retail sales of £1billion in August, followed by North America funds which saw net retail inflows of £122million.
Japan funds also enjoyed a bounce amid the Olympic Games with inflows soaring from £5million in July to £80million in August. Asia funds saw outflows of £57million.
In terms of asset classes, money market funds topped the list with £1.6billion of net retail sales, closely followed by equities with inflows of £1.3billion.
Elsewhere appetite for responsible investments also remained steady over the summer with inflows of £1.3billion in August. Funds under management stood at £85billion as of the end of August with an overall share of industry FUM of 5.4 per cent.
‘Responsible investment funds have consistently captured the interest of UK savers, who invested over £1 billion for the seventh consecutive month. UK investors are maintaining their commitment to deploying their capital for environmental and social good as well as seeking a financial return,’ IA chief Chris Cummings said.