Miranda Seath, director of market insight and fund sectors at the Investment Association, said the inflows were encouraging and showed that investors had a degree of confidence in the market, but cautioned that some of the uplift was seasonal and linked to the ISA season.
“A second consecutive month of net fund inflows suggests that investors do retain a degree of confidence, even as global economic uncertainty continues.
“Those willing to take on more risk have been investing in North American equities, buying the dip as valuations have fallen. This helped to give April’s inflows an extra boost,” she said.
Investor behaviour splitting ‘into two camps’
While some investors took risks with North America, others remained cautious. Inflows into arguably the safest class of asset, money market funds, were the highest of any asset class, up £1.1bn, following a similarly strong performance in March.
Investors pulled out of Asia, particularly China, over Trump tariff fears. Outflows from the China/Greater China sector rose to £121m in April, while less risky areas such as Europe saw inflows.
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Seath said: “We’re beginning to see investor behaviour split into two camps. Investors with a risk-on approach are putting their money into North American equities. Meanwhile, more cautious investors are favouring diversification away from US stocks into Europe and moving funds into lower-risk vehicles, such as money market funds.
“Looking ahead, the outlook for global markets will remain unclear as long as uncertainty hangs over the economy and tariff policy remains changeable. If tariff threats do push up prices, central banks may delay cutting interest rates. That kind of scenario could mean that market turbulence persists.”
A ‘gloomier’ picture
Victoria Hasler, head of fund research at DIY investment site Hargreaves Lansdown, said only a third as much was invested in funds this April compared with last, with the picture “somewhat gloomier”.
Regarding the popularity of money market funds, she said: “Many investors seem to have simply parked cash to be used at a later date.”
“This is perhaps unsurprising given the uncertainty [that] abounded in markets following Trump’s ‘Liberation Day’ tariffs,” she added.
She said money was continuing to be withdrawn from the UK, but there are signs that the exodus is slowing, with £817m leaving these funds in April compared to £1.2bn in the previous month.
