Equity funds take a thrashing on resurgent Covid fears
Not even the success of the vaccine rollout could take away the January blues for equity funds last month.
Inflows reached a five year high in the fourth quarter at £2.4bn buoyed by the vaccine rollout, but the euphoria hasn’t lasted long.
Net inflows fell by 97.5 per cent month-on-month to just £64.6m according to figures from global funds network Calastone.
““The euphoria that characterised the huge inflows to equity funds in the last few weeks of 2020, including even unloved traditional active funds, dissipated with the cold light of the post-holiday hangover,” said Edward Glyn, Calastone’s head of global markets.
“Dry January proved true to type as inflows evaporated.”
UK equities continued to bear the brunt of it as a third lockdown prompted outflows of £179m, the eight consecutive month in which investors had fled UK equities.
European equities which had a better 2020 saw a sharp reversal after the fallout from its slow vaccine rollout. After months of increasing inflows, January saw investors take flight selling down £141m. Glyn predicts outflows will continue in the short term.
It was a similar story for traditional active equity funds – those without an ESG mandate – which returned to favour in recent months. Investors shed £965m, virtually wiping out all the new capital it had garnered in December.
By contrast interest in ESG continued having accounted for more than half of all flows into equity funds in 2020. In January active ESG equity funds enjoyed inflows of £545m, their third best month on record. Calastone’s analysis found that the inflows these funds have seen in the four months since October are almost as high as the previous five and three-quarter years combined.
The prospect of a huge fiscal stimulus package in the US helped push bond yields higher last month. Fixed income funds enjoyed £1.2bn of inflows, almost matching December’s total.