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Investors pumped record amounts into equity funds in April as markets rallied

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06/05/2020
Investors flocked back to equity funds in April as stock markets rebounded after sharp falls in February and March.

A record £2.6bn flowed into funds during the month, following two months of money leaving the sector as the Covid-19 pandemic ravaged the global economy and shattered market confidence month, according to fund technology firm, Calastone.

Most of the buying took place in the middle of the month as evidence began to emerge that the outbreak was beginning to slow down in some of the worst-hit European countries. By the end of the month, inflows slowed to a trickle, Calastone said.

Global funds took in the most new money, adding a total of £1.1bn, easily the best month on record for the sector.

Funds focused on UK equities were close behind, adding £1bn, the second-best month ever seen for these funds.

Asian funds enjoyed their first inflows since November, while outflows from European funds slowed to their second lowest level since the end of 2018.

Fixed income funds enjoyed a better month after an unprecedented £3.6bn of outflows in March. In total, these funds took in £461m of investor money in April.

Edward Glyn, head of global markets at Calastone, said: “Fear receded in April and capital flooded back into funds in its wake. As markets began to rise sharply, investors scrambled to add to their fund holdings, eager not to miss the best month for markets in 40 years.

“Greater caution set in later in month, perhaps because investors began to question how solid the foundations of the rally could be given the mounting evidence of severe economic damage around the world, as well as White House sabre-rattling over new tariffs on China.

“Bear markets are often punctuated by brief moments of euphoria that see share prices inflate rapidly. But just as it is easier to puncture a balloon than knock down a wall, bear market rallies often deflate just as quickly as they occur.

“We don’t pretend to know which way share prices are going, but the slowdown in inflows suggests the uptick may at best be on pause for now.”

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