The latest Fund Flow Index from global fund network, Calastone, revealed that up to 23 February, equity funds enjoyed inflows of £646m.

But as Russia invaded Ukraine, investors pulled out their capital to a net £604m in the final three trading days of the month.

As inflows fell to just £42m for the month, this was 96% lower than the average monthly inflow over the previous twelve months, and a 79% fall from the previous month of January.

However, Calastone noted that increased buyer caution was a more significant driver than intensified seller fear. The value of buy orders fell 22% in the last three days of the month, while sell orders increased by 9%.

Overall, active funds with a UK equity focus were hit hardest, shedding a record £830m. And fixed-income funds also saw outflows for the first time since March 2020 at the onset of the pandemic.

There were also significant outflows from active emerging market and Asia-Pacific equity funds. Property funds suffered net outflows of £148m, the worst monthly reading since June 2021.

Turning to mixed asset funds, Calastone noted inflows fell to their second lowest level in more than a year.

However, ESG funds continued to remain popular, with investors adding a net £641m to ESG equity strategies, but sold down £598m of non-ESG funds.

‘Caution is the name of the game’

Edward Glyn, head of global markets at Calastone said: “Investors have a lot to worry them at present. Stock markets have certainly fallen since the Russian army invaded Ukraine, but the falls have not indicated a rout. This is reflected in equity fund flows – buyers have gone on strike, rather than sellers going hell-for-leather, suggesting that caution is the name of the game, rather than a rush for the exits. Buyers have simply opted to sit it out on the side-lines for the time being.

“The war is almost certainly going to exacerbate inflation at a time when prices are already rising very rapidly indeed. Higher inflation has been bad for bond markets in recent months, and indeed yields climbed through most of February (yields move opposite to prices). “This certainly contributed to outflows during the month.

“The especially large hit suffered by UK funds is partly because UK equity funds are the largest category by assets under management, but it may also point to the exposure that large UK companies like Shell and BP have to Russian assets. The UK stock market has also held up well year-to-date compared to its peers elsewhere, so the larger outflow may also represent an element of rotation.”