Investors pump record £3bn into equity funds as vaccine hotspots take gains

Equity funds on sale in the UK gathered a record £3bn in new money during April, as investors ploughed money into markets where Covid vaccinations have proved most successful.

According to data from Calastone, April was the second consecutive month of record inflows into equity funds, taking their total haul since the start of the year to £6.9bn.

The past six months have seen four of the best monthly inflows for equity funds since records began in 2015.

Investors ploughed the most cash into global equity funds, which notched up £1.6bn during April, followed by North American and UK equity funds, which garnered £576m and £303m respectively.

UK equity funds have continued their winning streak, with positive flows over the past three months helping them recoup all the outflows posted from the previous six-month period.

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The turnaround in fortunes for UK equity funds comes as Britain continues its vaccination drive, with more than 35 million people having received at least one dose, according to government figures. In the US, more than 115 million people are now fully vaccinated.

Funds focused on Europe, where vaccination progress has been slower, remained out of favour in April. European equity funds pulled in just £27m for the month, figures from Calastone showed.

Edward Glyn, head of global markets at Calastone, said: “Investors are looking to the post-pandemic boom that seems increasingly likely to take off in a synchronised fashion across the developed world. Households are sitting on top of record balances of unspent cash.

“Some has been doubtless earmarked for a bit of much-needed frivolity, but they are investing some of it too and funds are seeing inflows surge as a result.”

Active funds were among the biggest winners in April, accounting for 70% of all equity inflows.

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The latest haul means that in five of the past six months, active funds have gathered more new money than their cheaper passive rivals — a complete turnaround from the previous three years where active funds lagged their index counterparts.

Calastone said that, for the first time, active funds without a specific environmental, social and governance focus posted the biggest gains, pulling in £1.4bn compared to £692m for active ESG funds.

Meanwhile UK property funds, which in March suffered their worst outflows on record, saw investor redemptions slow by 86%.

Glyn said while outflows of almost £580m recorded in March may have been driven by investors wanting to crystallise losses before the end of the tax year, it was “too soon to call a trend of improvement for property funds, as the post-pandemic shape of the industry is still being drawn.”

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