UK-focused stock funds suffer ‘relentless negativity’

The “relentless negativity” about UK-focused equity funds was undiminished in April as outflows totalled £665 million, taking the cumulative withdrawal of capital to £21.3 billion in 35 consecutive months of selling.

That’s according to the latest Fund Flow Index (FFI) from funds network Calastone.

The continuing negativity surrounding UK-focused equity funds came as British investors continued to add strongly to their non-UK fund holdings.

UK investors added a net £1.93 billion to equity funds and £422 million to fixed income funds in April.

“Investor interest in North American equities continued in April with net inflows of £1.25bn, the fourth best month on record,” said Calastone.

“The previous three best months were also all in 2024.

“Global and European equities were also major beneficiaries of investor optimism, absorbing £1.49bn and £471m respectively.

“Indeed global funds had their best month since April 2023 (£1.59bn) and European funds their third best month on Calastone’s record.

“Meanwhile there was a marked reversal of the recent appetite to buy emerging market funds. Investors broke an 18-month run of inflows by selling a net £162m of their emerging-market holdings.

“The relentless negativity on UK-focused equity funds was undiminished, despite the UK market reaching a record high.

“Outflows totalled £665m, taking the cumulative withdrawal of capital to £21.3bn in 35 consecutive months of selling.”

Calastone said the UK’s ISA season clearly played an important role in April.

“More than half the month’s inflows to equity and fixed income funds took place in the first five days of April, before the 2023/24 tax year ended, as retail investors banked any leftover ISA allowance,” said Calastone.

“For mixed asset funds, strong inflows in the last few days of the tax year had turned to outflows by the second half of the month.

“If we take the cumulative inflows during the whole ISA season from the middle of February to the end of the tax year, then equity funds absorbed £5.17bn, more than five times as much as in 2023 (£981m) and better than any year on Calastone’s record.”