Investors pile back into funds as markets rebound

Global equities and bond funds were popular in March and April, writes Sam Benstead.

The end of winter saw risk appetite return among UK investors, with stock and bond market funds seeing strong inflows in March and April.

UK investors put £2 billion into funds in March, the highest amount since December 2021, according to data published by the Investment Association (IA), the trade body for the funds industry.

Equity funds gathered £643 million more assets, multi-asset funds added £745 million, and tracker funds saw £1.6 billion of inflows.

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Tracker funds under management stood at £284 billion at the end of March, with their overall share of industry funds under management now at just over 20%.

The most-popular equity region was global shares, adding £654 million, while UK funds saw outflows of £835 million, and assets in Asian and North American strategies also fell, according to the IA.

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In March, the MSCI World index of global shares rose 5% in dollar terms over March and April, and 1% in sterling terms due to a stronger pound. The FTSE All-Share was flat and US shares, in dollar terms, rose 5.5%.

Bond funds were very popular in March, with short-term money market funds and corporate bond funds adding £667 million and £529 million in assets respectively.

Higher interest rates are drawing investors back to the sector, as falling bond prices mean that yields have risen, meaning investors are finally getting paid to hold bonds.

Calastone, a fund data firm, found that the trend continued in April, with UK investors “charging” back into equity funds at the fastest pace for two years, and adding £1.4 billion into funds overall.

Similar to IA data, global funds were top of the preference list, according to Calastone figures. Net inflows to this sector were £1.58 billion during the month, the fourth highest on record (the third highest was in March), while emerging markets were also strongly in favour, with net inflows of £364 million.

Among other assets classes, money market funds attracted 10 times more capital than their long run average in April – an inflow of £333 million, taking the year-to-date total to £806 million, Calastone noted. 

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Edward Glyn, head of global markets at Calastone, said: “The surge in buying of money market funds reflects investor interest in the high yields they are offering at present, as well as diversification of cash deposits by savers with deposits above the insurance threshold. Concerns over the health of the global banking system are behind this move.”

Chris Cummings, chief executive of the IA, adds: “In March, with the approaching end of the tax year coinciding with a better-than-expected forecast from the Office for Budget Responsibility, investors took the opportunity to invest across all major asset classes and maximise on their tax-free ISA allowance.

“Our research shows that most investors see investing as delivering better long-term returns, with 41% of investors intending to put more money into their ISAs this year, than in the previous tax year.”