UK investors piled back into equities in February after outflows in January, according to Calastone’s latest Fund Flows Index.
Equity funds received a net £1.09bn after £640m was pulled in the previous month.
However, investors continued to sell off UK-focused funds, with £1.22bn leaving the sector over the month.
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Instead, global and North American funds enjoyed a strong month, with net inflows of £2.09bn and £770m respectively.
Edward Glyn, head of global markets at Calastone, said: “February’s global equities marched investors to record heights and then marched them back down again, leaving them nursing losses for the month. Investors were clearly wary – inflows to equity funds were around half the monthly average for the last year.
“The fact that the UK stockmarket bucked the trend was seemingly immaterial to investors clearly bent on switching steadily out of domestically focused funds.”
He added: “UK investors are still structurally overweight on UK equities relative to the UK’s share of global market capitalisation, but the relentless purchase of global and North American funds is only increasing their exposure to the US market, and in particular its magnificent seven stocks.
“This is not without risk, as the volatility in share prices of these big tech stocks in recent months shows.”
Fixed income
Fixed income funds also attracted strong interest in February, attracting £1.14bn net inflows. With yields hitting highs last seen in 2008, investors locked in to record the third strongest month on Calastone’s record for the asset class.
Within fixed income, high yield funds had their best month on record with £305m inflows.
Sovereign bond fund inflows of £201m were almost double the sector’s monthly average for the last year.
Calastone’s Glyn said: “The surge in interest in bond markets was clearly spurred on by the buying opportunity presented by the exceptionally high yields on offer in January.
“Bond markets have calmed considerably since then, but investors who bought when yields peaked are already sitting on capital gains and have locked in at very attractive prices. If inflation once again slips its chains and makes another run for it, this rally could prove short-lived.”
This story was written by our sister title, Portfolio Adviser
