Investors piled a net £27.2bn into equities in 2024, surging past the previous record of £19.8bn for a calendar year set in 2021.
According to Calastone’s latest Fund Flow Index, global equity funds were the largest beneficiaries, with £19.5bn of net inflows over the course of the year.
The enthusiasm for equities did not translate to UK equity funds, however, suffering £9.6bn outflows. This marked the sector’s ninth year of outflows and its worst year on record relative to the broader market.
European equity funds posted a record year for flows, pulling in £3.2bn, while emerging market funds enjoyed their second best year on record.
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Asia Pacific also shed record outflows, with the £1.8bn the most the region has seen in a calendar year.
Greater China funds also suffered outflows, while Japanese equities pulled in a record £1.59bn to the sector.
Edward Glyn, head of global markets at Calastone, said: “Global funds are dominated by US stocks already, but the additional focus specifically on that region shows that investors are doubling down on Wall Street. Purchases were very front-loaded in the year, however, and there has been greater wariness as markets have tested new highs.
“A correction in August and a wobbly December for global markets have reminded investors that risks abound. The bond markets are the place to look for these signals. The summer saw fears rise over government deficits and inflation; this has pushed yields in many major bond markets back towards the 15-year highs we saw at the beginning of 2023 – and bond prices lower as a result. Consequently, equities look more exposed, especially in those parts of the world where they have raced ahead.
“That does not include the UK. The UK stockmarket badly underperformed most of its peers in 2024 and this has only intensified the extent to which UK-focused funds are being shunned by investors. The last year to see significant inflows was 2015. Since then, £45bn has been withdrawn from the sector. UK equity valuations are clearly cheap, but investors are capitulating, seemingly giving up hope that a long-awaited re-rating will occur.”
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Fixed income funds saw inflows drop to £1.3bn in 2024, down considerably from the £7.7bn that flooded into the asset class in 2023. Flexible bond funds particularly suffered, with investors pulling £3.35bn from the sector.
Bond market weakness aided money market strategies, which had their best year ever with £1.86bn inflows.
Mixed asset funds also enjoyed their strongest year since 2021, enjoying inflows of £14.6bn.
By style, passives dominated with £29.6bn inflows. Investors redeemed £2.4bn from active funds over the year.
This story was written by our sister title, Portfolio Adviser
