Index trackers brought in net inflows of £3.4bn throughout July while active funds lost £2.1bn in the month, according to the latest figures from the Investment Association.
The inflow to index trackers is the second-highest on record, behind only April 2024 which recorded £3.8bn with the boost of ISA deadlines. With the July flows, tracker funds now represent a quarter of the industry funds under management.
In total, UK investors put £1.3bn into funds throughout July, the second consecutive month where inflows were over £1bn. Net retail sales for July show a turnaround from 2023, where investors withdrew £2.13bn in the month.
Miranda Seath, director of market insight & fund sectors at the Investment Association, said: “July’s UK general election result has created a measure of political certainty, which is helping investor confidence, and the UK government’s commitment to driving economic growth as its core priority, while maintaining fiscal responsibility is a positive signal for markets.
“The impact of the incremental Bank of England rate cut to 5% in August, although not captured in July’s fund flow data, should also help to boost investor confidence as the outlook for inflation has improved and we have reached the peak of the rate cycle.”
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By sector, short-term money markets led the pack with net retail sales of £806m. The global sector brought in £625m, followed by sterling corporate bond funds at £404m.
The IA UK All Companies sector, however, had the largest outflows at £655m. By region, UK funds also represented the largest group for outflows with £919m.
“To really drive flows back into UK equities however, investors need to see the UK economy deliver growth. At the same time, there is a shifting picture across Europe, the US and Japan: the world’s major economies are not quite out of the woods yet and recent market corrections in the US and Japan show that there is still room for volatility,” Seath said.
“This may make UK equities relatively more attractive compared with peers. While we haven’t seen a dramatic shift in investor behaviour following the election, we have seen inflows into UK equity trackers – this could be an early sign that investor sentiment is improving.”
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Equities as an asset class experienced outflows of £113m in the month, but equity index trackers attracted £2.3bn. UK all companies trackers brought in funds for the second month in a row, with £83m in net inflows.
While equities dipped into the red for July, fixed income funds brought themselves back to the green with £444m in net retail sales after two months of outflows. Corporate bond funds added £404m while government bonds were boosted by £223m.
This story was written by our sister title, Portfolio Adviser
