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New record for ESG inflows while investor risk appetite soars on vaccine news

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The Covid-19 vaccine news last month saw the second-highest inflow into equity funds on record, as investors ploughed capital back into the riskiest assets as well as ESG funds.

The latest Fund Flow Index from global fund network, Calastone, revealed net inflows into equity funds in November totalled £2.3bn, the second highest on record after April 2020.

Calastone said the link to the vaccine announcements is “clear to see” as in the five days before the Pfizer vaccine news, equity funds saw outflows of £389m.

But in the five days after the vaccine news, inflows totalled £1.4bn. The network said investors sold safe-haven money markets on the back of the Pfizer news as they took on more risk in equity funds.

A further £897m flowed into equity funds in the five days following Moderna’s vaccine news. And the Oxford/Astrazeneca vaccine news saw investors part with £429m.

However, UK-focused equity funds were the only major equity fund category to see outflows in November (-£222m).

But ESG (Environmental, Social, and Corporate Governance) fund inflows broke new records.

A total of £820m of new capital was added to the category – more in the single month of November than in the entire five years to January 2020.

Meanwhile, the US election caused a more muted reaction as cash flowed out of equity funds into safe-haven alternatives.

The network noted that active funds had their best month in five years, with £1.6bn of new capital in the month of November, reversing the cumulative outflows seen since May 2020.

Most of the money went into active global funds, which witnessed a record £1.5bn of inflows. Index tracking funds saw £713m of inflows, broadly in line with the monthly average of the last year.

‘Huge sigh of relief that pandemic nearing an end’

Edward Glyn, Calastone’s head of global markets, said: “The long-awaited vaccine news could scarcely have been any better. Despite languishing in renewed lockdown confinement, investors went off to the races to celebrate.

“Record fund turnover, record inflows for some of the biggest equity fund categories and near-record inflows for equity funds overall add up to a huge sigh of relief that the end may finally be in sight for the pandemic and its devastation of the global economy. A big switch from safe-haven to riskier assets is all part of this excitement.

“Active fund managers will also celebrate such a successful month after enduring months of outflows. Anchored in monthly savings plans, index-tracking fund flows tend to be steady and positive, but active funds benefit much more when there is a big positive swing in sentiment.”

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