UK savers put £1.2 billion into funds as inflows bounced back in June, with the figure bringing overall inflows for the first half of 2024 to £1.7 billion. This contrasts with £5.6 billion outflows in H1 2023 and £18.6 billion outflows in H2 2023, further signalling a potential turn of the tide for fund flows and improving investor confidence.
Key findings for June and H1 2024
- Index trackers took in £2.6 billion in net retail sales in June, overwhelmingly to equity index trackers. Inflows to index trackers for the first half totalled £15.1 billion, already exceeding the annual £13.8 billion inflow in 2023.
- Retail investors placed a net £1.2 billion into equitiesin June, lifting the first half inflow to a positive £424 million. H1’s positive inflow was driven by a rebound in sales in Q2, which saw inflows of £2.0 billion, compared with a £1.6 billion outflow in Q1.
- June’s inflows included a record monthly inflow of £868 million into Europe ex UK sector funds.
- Money Market funds saw inflows of £1.2 billion in June, with the £1.5 billion inflow to Short Term Money Market making it the best-selling IA sector for the month.
- Fixed income funds saw net retail outflows of £1.2 billion in June, reducing the first half inflow to just £58 million for the asset class. Following a £440 million inflow to bond funds in Q1, investors pulled £382 million in Q2.
- Responsible Investment funds saw outflows continue in June, with £302 million pulled. £1.4 billion was taken from these funds in the first half of 2024.
All eyes on equities
With a return to inflows of £1.2 billion for equities in June, the data points towards improved investor confidence as inflation continues to fall. In early June, encouraging inflation data and stable prices enabled the European Central Bank to make a 0.25% cut to three key interest rates. In IA data, Europe ex. UK equity funds saw a record monthly inflow of £868 million amidst improving economic conditions.
Looking at the bigger picture, the data also shows investors allocating capital to equities across other regions in Q2, with the highest inflows of £2.7 billion going to global equities as investors again opt for diversification. This is a shift from Q1 where the strong performance of the US and the magnificent 7 stocks had attracted investors to put £1.5 billion into North American funds.
Overall, equities have seen a year-to-date inflow of £424 million, compared to a significant £10 billion outflow in the asset class in the first six months of 2023. Despite mild outflows of £1.6 billion in the first three months of the year, the six-month positive result has been driven by a Q2 rebound of £2.0 billion in net retail sales, boosted by inflows throughout ISA season.
An inflection point for equity flows
Quarterly equity flows by region
Whilst UK equities remain in outflow following a record movement out in May, investors may begin to feel more positive about investing in UK companies as the new government sends a clear message on delivering economic growth.
Miranda Seath, Director, Market Insight & Fund Sectors at the Investment Association, said: “June has seen a return to inflow as investors opted to allocate capital back into equities. Investor confidence has been building throughout Q2 2024 as inflation has calmed and, in the UK, we have seen the first base rate cut from the Bank of England since March 2020. This decision could help to improve confidence and flows as we head into the second half of 2024.
“However, recent movements on the global stage on the back of poorer than anticipated US employment data have highlighted the complexities of the macroeconomic environment. Whilst the health of the US economy has implications for all major markets, it’s critical that investors remain focused on long-term goals rather than short-term market fluctuations.
“Investors thrive on greater certainty and in the UK, investor sentiment should be further improved by the new Government’s commitment to driving growth and maintaining fiscal responsibility. Following a prolonged period of outflow, we are beginning to see conditions that could give a boost to UK equities as we move into the autumn.”
