UK investors added £11.39 billion to their stock fund holdings in the first half of 2024 as they piled into North American and global funds — but they withdrew £3.75 billion from UK focused funds.

That’s according to the latest Fund Flow Index from Calastone, the largest global funds network.

“In the first half of the year, North American and global funds absorbed £7.80bn and £7.58bn respectively, though this was offset by a £3.75bn outflow from UK focused funds,” said Calastone.

“European and emerging market funds also did well, while income funds suffered outflows.”

In June, UK investors added £1.72 billion to their equity fund holdings.

“Global equity funds were June’s most popular category, scooping up a net £1.36bn, while European equities absorbed a net £714m,” said Calastone

“Elsewhere, emerging markets saw inflows return after two months of net selling – investors added £269m in June, almost entirely favouring global emerging market funds.

“The biggest change was in North America. After breaking a number of records already this year as investor cash poured into the sector at breakneck speed, inflows completely dried up in June.

“Investors withdrew £0.6m from North American equity funds during the month, despite the ongoing strong performance of the US equity market …

“Meanwhile, although the UK stock market dropped back from its record highs in May, net outflows slowed during the month.

“Investors cashed in £522m of their UK-focused equity fund holdings, making it the least bad month so far in 2024.

“Outflows slowed during the month too – the second half of June saw significantly less selling than the first half.”

Investors withdrew capital from bond funds for the second month in a row, pulling £471 million from their holdings in June, and taking the two-month total to £1.11 billion.

Edward Glyn, head of global markets at Calastone, said: “All eyes are trained on the world’s central banks, looking for signals that long-awaited rate cuts from the Fed and the Bank of England will follow those like the ECB, Swiss National Bank and the Bank of Canada which have already begun to bring the price of money down.

“Hopes for cheaper money after the painful rate squeeze of the last two-and-a-half years are the clear driver of record flows into equity funds so far this year.

“The US market valuation is not cheap, however, and this means investors are hoping that earnings growth will deliver, as the prospect for multiples to expand further is surely limited at present.

“By contrast, large markets such as the UK and Europe are trading on less challenging valuations, while many emerging markets are set to benefit from the weaker dollar and a nascent commodity boom.

“The outflows from fixed income funds in the last two months are harder to understand. If investors truly believe rates are coming down and will stay low, then there are capital gains to be made in the bond markets. Perhaps the allure of equities simply looks too strong at present.

“Moreover, since the beginning of 2022, bond funds have seen inflows more than twice as large as equity funds (£8.3bn v £4.0bn), so the current picture may simply reflect a rebalancing of investor appetite.”