Vaccine rollout sees UK equity funds break 8-month run of outflows
UK equity funds enjoyed their first inflows since last May with investors boosted by the success of the vaccine rollout.
It brings an end to a difficult eight months which saw funds shed £2.2bn of capital, according to global fund network Calastone. Last month investors cautiously dipped their toes into equity funds with £145m in inflows.
UK equity funds started the year on a sour note with £179m in outflows which continued into February. But by the last week of the month, as the government set out its roadmap for easing coronavirus restrictions, some £19m made their way into UK equity funds.
This was largely triggered by an upset in the bond markets but UK-focused funds continued to see bigger outflows than any other category.
Overall equity inflows grew to £961m but North American funds saw their first outflows since last March. Similarly investors turned their back on European months for the second month in a row.
“Rising bond yields and the falling US dollar are the big stories in global markets at the moment. For a US market dominated by extremely highly valued tech stocks, rising bond yields are a clear and present danger – with so much of their value tied up in their future prospects, a higher cost of money (or discount rate) is very bad for share prices of these giants. Outflows are the inevitable result,” Calastone’s head of global markets Edward Glyn said.
Interest in ESG accounted for more than half of all flows into equity funds last year with the trend carrying into 2021.
In January active ESG equity funds enjoyed inflows of £545m, their third best month on record. Calastone’s analysis found that the inflows these funds have seen in the four months since October are almost as high as the previous five and three-quarter years combined.
In February ESG equity funds reached a record high attracting some £808m in capital.