Investors pile into equity funds

Inflows to equity funds surged to £2.4 billion in December, according to the latest Fund Flow Index from Calastone, as the mass vaccine breakthrough and prospect of a global economic recovery boosted investor confidence. December was the second-best month on record and took the fourth-quarter total to £4.6 billion, its highest since mid-2015. For the whole of 2020, equity inflows were £7.5 billion, almost four times as great as in 2019.

The last two months of the year saw inflows totalling £3.2 billion into active equity funds, a reversal from outflows in two out of every three months during the last three years.

ESG strategies accounted for half of the new capital flowing into active equity funds in November and December, but active global, North American and European funds made up the rest.

Fixed income funds also ended 2020 on a high, as inflows surged to £1.2 billion in December, almost double the November total and leaving Q4 with the best inflows since mid-2019.

Edward Glyn, head of global markets at Calastone said: “The ‘coronacoaster’ year for equity funds ended on a high as rock-bottom interest rates and the prospect of mass vaccination boosted both stock market valuations and the appetite to hold shares.”

Markets with high growth characteristics like Asia, emerging markets and the US had benefited most from the uplift in valuations, which was reflected in fund flows, he said, while those with low growth characteristics and a high yield, such as the UK, have been left far behind.