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Historic low rates and cash savings boost £4.8bn investment fund inflows

Not every fund manager is enjoying a surge in investments

UK investors allocated money in their in droves in July, as £4.8bn flowed into funds last month.

The number is three times higher than the figure seen in the same month last year.

So far in 2021, investors have put £28.9bn into funds, while recent data shows there is no sign of this trend slowing down.

With interest rates at historic lows, and many people building up a nest of savings during lockdowns, more money is being directed towards investment opportunities this year.

Many expected a slow-down in the rate of investing as summer came, and more people had the opportunity to spend their money.

“Global funds have been the big winner, netting another £862m of inflows in July, taking the sector to £7.7bn of inflows so far this year. Investors have been rewarded with a near 11% return so far this year from the sector, compared to a 13% return from the MSCI World index,” said Laura Suter, head of personal finance at AJ Bell.

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However, not every fund manager is enjoying a surge in investments. “The UK Equity Income sector clocked up its 14th straight month of outflows in July, with another £46m leaving funds in the sector. During those 14 months investors have pulled almost £5bn from UK Equity Income funds. It would appear the scars of the dividend drought in UK equity markets last year are still fresh for investors, as they’ve failed to return to the market despite dividends recovering,” said Suter.

Additionally, property investment funds have had an even worse time, and the sector is now just two months shy of having three years of straight monthly outflows.

“While the residential property market has been going gangbusters during the pandemic, that hasn’t translated into people’s investment portfolios. The lock-ups in the funds, concerns about liquidity and subsequent closing of some funds means it will be a long time before we see inflows to the sector. On top of that, FCA plans to potentially bring in a notice period for the sector could well be the final nail in the coffin, with the majority of investors saying it would put them off investing**.”

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