UK funds ‘left in the dust’ as British investors pile into US shares

UK investors invested a record £7billion into equity funds in the first quarter of 2024, but shunned domestically-focused vehicles for opportunities in North America, data suggests. 

Just shy of £7billion was invested into North American equity funds over the period, against £6.4billion for the past nine years combined, Calastone’s latest Fund Flow Index shows.

Conversely, last month UK equity funds saw outflows increase to their highest since February 2023, meaning there has been 34 consecutive months of net selling.

North American funds across all asset classes absorbed a record £5.7billion of UK investor capital in the first quarter, which is more than three times the previous best quarter, the report suggests.

Where’s your cash going? UK investors added more cash to North American equity funds since December 2023 than in the previous nine years combined, Calastone said 

UK equity fund outflows came in at £823million in March, marking their worst month since February 2023, when the exodus sum reached £962million. 

First quarter 2024 UK equity fund outflows reached £2.1billion, representing the fourth worst quarter for UK equity funds on Calastone’s record. Income funds, which are heavily weighted to the UK, also saw outflows continue.

In the latest spring budget, Jeremy Hunt announced plans for the launch of the British Isa.  

The British Isa will be a new type of Isa which will allow savers to invest an additional £5,000 a year tax-free in UK assets.

The British Isa would allow people to invest a further £5,000 on top of the existing £20,000 annual allowance, but only into UK assets.

Big idea: Chancellor Jeremy Hunt unveiled plans for the British Isa in his latest spring budget

Watch that flow: Net fund flow chart comparing North American versus UK-focused equity funds 

Edward Glyn, head of global markets at Calastone, said: ‘Global equity markets have surged since the end of October. 

‘Japan, the US and Europe have led the charge, all up by more than a quarter and leaving the UK in the dust – the UK’s top 100 has eked out just 8.6 per cent over the same period. 

‘UK equities are certainly cheap, but investors worry where the growth is going to come from to drive earnings higher. 

‘Add a relentless narrative of gloom about the prospects for the London stock market and it’s hard to persuade anyone to hold UK-focused funds. 

‘Meanwhile the US earnings recession is over – profits are once again on the up and that seems to be the main catalyst driving fund inflows and higher share prices.’

After North American equity funds, global equity funds were the next most popular choice for UK investors in both March and the first quarter, with inflows coming in at £1.22billion and £3.3billion respectively.     

Emerging market equity funds came third in March, with inflows of £362million by UK investors. It was not a record quarter for emerging markets, but the £700million worth of inflows in the first quarter was almost three times the historic quarterly average, Calastone said.

This post first appeared on Dailymail.co.uk