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Calastone: UK investors ditch home market for US equities at record rate

Net inflows to North American funds were higher over the last four months than in the previous nine years combined

american flag with stock trend


UK investors have piled more cash into North American equity funds in the last four months than they have in the previous nine years combined, according to Calastone’s latest Fund Flow Index.

Between December 2023 and the end of March this year, investors added a net £6.69bn to the sector compared with £6.38bn for the previous nine years combined. In March alone, North American funds attracted £1.77bn.

Equities as a whole attracted a net £2.3bn in March, ensuring Q1 2024 was a record for equity fund inflows, totalling £6.97bn since January.

Global equity funds also proved popular, both in March and in Q1, with net inflows of £1.22bn and £3.3bn respectively.

See also: Advisers expect UK equities to bounce back and property to struggle

By region, only Asia-Pacific and UK equity funds recorded outflows.

Despite the FTSE 100 reaching its highest point this year in March, it was the 34th consecutive month of net outflows for the UK. The net £823m sell-off was the worst month for flows since February 2023.

Edward Glyn, head of global markets at Calastone said: “UK equities are certainly cheap, but investors worry where the growth is going to come from to drive earnings higher.

“Add a relentless narrative of gloom about the prospects for the London stock market and it’s hard to persuade anyone to hold UK-focused funds. Meanwhile the US earnings recession is over – profits are once again on the up and that seems to be the main catalyst driving fund inflows and higher share prices.”

Elsewhere, there was also increased demand for emerging market products, with investors placing £362m in the asset class in March.

Country-specific funds also enjoyed inflows, particularly those investing in India, Japan and South Korea, while China funds suffered outflows.

ESG equity strategies also continued to see net inflows, with £691m net new cash arriving in March.

Among other asset classes, £460m flowed into fixed income funds, rising to their highest level since June 2023. Meanwhile, outflows continued for mixed asset funds and property funds.

Glyn added: “Bond markets have had a rough start to 2024 as hopes for rate cuts were pushed further out into the future.

“Yields have risen to levels last seen in November, which pushes prices lower. and are proving increasingly attractive to investors keen to lock into relatively high levels of income and who believe there is the prospect of capital gains to come when rates fall.”

This article was written for our sister title Portfolio Adviser

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