Investors storm back into markets

Investors put £4bn into funds in April, following record outflows in March, according to new figures.

£1bn flows into UK-focused funds – largest since the Boris Bounce and global equity funds see £1.2bn of inflows as they rebound. 

Laura Suter, personal finance analyst at investment platform AJ Bell, comments on the latest Investment Association figures: “Investors stormed back into markets in April, with renewed optimism that stock markets globally would rebound and that the falls seen in February and March were behind them. After record outflows in March investors committed more than £4bn to funds in April – more than triple the inflows seen in the same month last year.

“Global equity funds were the big winners, as investors tried to capitalise on hoped-for rises in equity markets across the globe. A total of £1.2bn of investor money was put into these funds, a swift turnaround from the almost £700m of outflows seen the previous month. Global markets rallied in April, rewarding investors, with the MSCI World index rising by 13.6% in the month following heavy falls earlier in the year.

“The UK also looked attractive for investors as the FTSE rebounded in April and shrugged off some of the losses it saw in February and March. More than £1bn of investor money was put into UK-focused funds in the month, the largest influx of money since the so-called ‘Boris bounce’ fuelled investor inflows in December last year. And these investors were rewarded, with the FTSE 100 rising 4% in the month while the FTSE 250 index jumped almost 9%.

“Investors are backing active fund managers to help navigate the volatile markets at the moment, with the bulk of the inflows going to active managers and a much smaller proportion going into tracker funds. In theory now should be the time for active managers to shine, as they target the companies that are unfairly discounted or primed to rebound and avoid those that are going to be casualties of the current crisis.

“The current crisis has also pushed more investors into ethical investing, with record inflows during April of almost £1bn. While the environmental aspect of ESG funds was always the draw for many investors it’s likely that we’ll see the ‘Sustainable’ branch of responsible investing becoming more prominent as we recover from this crisis.

There’s a lot of focus on how companies are reacting to the coronavirus crisis in terms of how they are treating their staff, whether they are using the Government support schemes and how they’re supporting wider society. Investors are likely to pay close attention to these aspects as the companies that responded well are likely to have gained a lot of goodwill that will stand them in good stead as we move into the recovery phase of the pandemic.

“Unsurprisingly UK Direct Property funds saw little movement in flows in the month, as the majority of the sector remains suspended to withdrawals and inflows while the property market has ground to a halt during the crisis. Once some of these funds start to re-open we’d expect to see an increase in outflows as investors who have been burnt by the closures and have worries about the future of the UK property market decide to redeem their investments and shift it elsewhere.”