A strong recovery in global markets has temped UK investors to return to equities. Equity funds attracted £449m in November 2023, according to Calastone’s Fund Flow index (FFI). The inflows follow six months of net selling for equity funds, losing £4.5bn between May and October 2023. Similarly, falling bond yields in November after a continuous six-month rise drove capital back to fixed income funds for the first time in four months, with investors adding £256m to their holdings. But Calastone noted investors remain cautious despite the uptick in equities and fixed income flows. Money market funds attracted more than double the amount of capital hat fixed income funds received in November, with £525m of net inflows. In the year to date, they have gathered £4.1bn of cash, more than the previous eight years combined (£3.5m). Calastone also found that buying was selective in November, with investors adding a record £414m to emerging markets funds, which have had net inflows for four months in a row. North American funds also registered inflows thanks to the continued strength of the US economy, gathering £481m of new capital, making November their best month since June 2022, Calastone said. Japanese funds also attracted modest inflows of £111m, with the FFI noting this accounted for almost £9 in £10 of net cash flowing into specialist regional funds. Yet Asia-Pacific, Europe, UK, income and infrastructure funds all suffered outflows over the month. APAC funds accelerated their net selling to their second highest level on record at £229m, alongside sector funds which had their worst month ever with £296m of outflows, mostly driven by the selling of infrastructure funds. Outflows continued for European and UK equities, although the level reduced to £330m for the latter. Calastone said this was “their best reading since March 2023”, but still marked the 30th consecutive month of withdrawals. November saw good news on inflation in the US, the UK and in Europe, which investors increasingly hope will stay the hand of policymakers deciding on the next move for rates. Equity prices duly rebounded during the month, which has tempted investors back into equity funds, favouring those parts of the world with better growth characteristics, like the US, and those that benefit when US interest rates start to fall, like emerging markets. The report said the numbers suggest a positive macroeconomic picture led investors to deploy some dry powder. But overall, investors have remained cautious. Separate data from Morningstar showed UK-domiciled money market funds held more than £1tn in September, while Calastone reported DIY investors added more than £500mn to money market funds last month – a grand total of £4bn year-to-date.

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Churchill Wealth Management Limited is located at 13 Alma Vale Rd, Bristol BS8 2HL, United Kingdom.

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