UK investors pulled £2.7bn out of the Investment Association (IA) universe in February, according to the body’s latest fund flows update.
The data marked an increasse in net withdrawals from the £1.6bn pulled by investors in January.
All major asset classes suffered outflows in the month, with net withdrawals highest from money market funds. Investors took out a net £1.2bn from the asset class in February, mainly from the Short Term Money Market sector.
Meanwhile, equity fund outflows slowed to £259m as investors opted for funds investing in North America and India.
North America was the best-selling IA sector, receiving a net £770m. The India/Indian Subcontinent sector enjoyed record monthly inflows of £228m – equivalent to 4.7% of the sector’s overall funds under management.
Elsewhere. fixed income suffered outflows of £231m, while investors pulled £975m from multi-asset strategies.
Tracker funds enjoyed further popularity with investors, pulling in net retail inflows of £2.1bn in February.
See also: Risk appetite recedes despite rate cut expectations – State Street
Passive funds under management stood at £334bn at the end of February, growing their overall share of industry FUM to 23.3%.
“February marks a second consecutive month of outflows across all asset classes. Flows to funds tracking indices continue to buck this trend, remaining resilient,” said Miranda Seath, IA director, market insight & fund sectors.
“Investors continue to use tracker funds to gain cost effective exposure to the major developed markets– the US stockmarket has returned 6% since the beginning of 2024 and that has translated into solid sales to trackers, which made up two thirds of inflows to the top selling North America sector.
“Investors are also looking to opportunities in India and the Indian Subcontinent. This is a relatively small sector by FUM, but in February a record inflow suggests that India is emerging as an attractive alternative to China. China’s economic growth has struggled after a tough pandemic and investors have pivoted.”
She added: “Outflows from money market funds are at levels last seen in June 2022. As investors see inflation stabilising, and with it the promise of interest rate cuts, they are starting to re-allocate away from cash-like funds. Some of that capital may flow back into equities as we are beginning to see in the North America and Indian sectors.”
This article was written for our sister title Portfolio Adviser
