• US funds saw £1 billion outflow in March, according to the latest Investment Association data
• Global funds and mixed asset funds in vogue
• ESG funds see big inflows, but tracker fund sales wane
• Institutional investors are still running for the hills
Laith Khalaf, financial analyst at AJ Bell, comments:
“Investors sold down a big chunk of US funds in March. Some of this was probably profit-taking, following an incredibly strong run for the US stock market. But investors might also be concerned about the prospects for interest rate rises to dent the share prices of the big US tech firms that now make up such a large part of the S&P 500. UK equities also saw their first small monthly inflow in almost a year, and following five years of getting the cold shoulder from investors.
“This could be a pretty significant turning point, as investors reflect on what’s performed well in the past, and where opportunities lie for the future. The global sector continues to attract inflows, so investors aren’t totally downbeat on the US, seeing as these funds have a high weighting to the US, which now makes up around two thirds of the global developed stock market. Mixed asset funds also experienced strong inflows, which suggests investors were looking to take a bit of risk off the table.
“ESG funds had a bumper month in March, no doubt a result of ISA season investors choosing an ethical home for their money this year. Tracker funds also saw money flowing through the gates, though the pace of inflows has slowed notably in the last couple of months. It’s possible we may be approaching ‘Peak Passive’ in the UK, particularly now that long standing investment trends seem to be showing tentative signs of going into reverse, which should in theory favour a more active approach.
“Institutional investors are still running for the hills though, withdrawing £1.3 billion from investment funds in March. Institutional flows have been negative since the start of the year, which is of some concern as clearly institutional investors help to drive market prices. It wouldn’t be the first time that big money proved itself not to be smart money though. In October of last year, institutional investors withdrew £8.4 billion from investment funds, just before the arrival of the Pfizer vaccine provided a big boost to stock markets.”
