UK-focused funds suffered their worst ever quarter for net flows with investors pulling £1.19bn in March, despite the UK market outperforming the global index from a returns perspective, according to Calastone’s latest Fund Flow Index.
In the first quarter as a whole, investors have redeemed £3.48bn from UK equity funds.
Market volatility did not deter UK investors from piling into the US stockmarket, with North American equities posting their third-best month on record for fund flows despite the S&P 500 falling 4% in the month.
Calastone’s latest Fund Flow Index recorded £1.77bn net inflows for North American equity funds, while trading volumes also jumped.
European equity funds also recorded £217m net inflows, with the European market posting a strong first quarter relative to the US.
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Investors sold £700m worth of bond funds, the worst month since September 2024.
Some investors flocked to safe haven money-market funds, which welcomed in a net £513m, taking the total to £1.45bn for Q1, the best calendar quarter on record for the sector.
Edward Glyn, head of global markets at Calastone, said seasonal patterns help to explain some of the uptick in equity fund buying in March, with investors typically seeking to use up Isa allowances before the tax deadline in April.
“The strong appetite for US equities in March is at odds with tidal forces in global markets that are seeing a strong rotation out of US assets and into markets like Europe and the UK. It may well be that some investors judge the recent falls to be a dip worth buying.
“Certainly record volumes of US fund trades in the context of the US-market weakness suggest there is a significant amount of disagreement among investors. The numbers trading out and those trading in are much larger than usual.”
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“Bond flows perhaps tell us more about underlying investor sentiment at present,” he added.
“In the bond markets, higher yields have proved tempting to investors in recent months, but this was not the case in March. Headlines dominated by talk of trade wars, economic uncertainty and inflation have seemingly put bond investors off the asset class for the time being. Strong flows into safe-haven money market funds suggest uncertainty is a key motivator.”
This story was written by our sister title, Portfolio Adviser
