After a month of decline during January, £1.09bn was injected into equity funds, according to Calastone, the largest global funds network.
Thanks to rising bond markets, February was the third-best month for inflows to fixed income funds in the network’s 10 years of collecting the data.
However, UK-focused funds experienced £1.22bn in outflows, the sixth-worst month since the funds were recorded.
This was despite the domestic index outperforming global markets by 1.6% compared to 0% for the rest of the world.
Further, fixed income funds enjoyed the third-best ever month for the sector, with a £1.14bn net inflow.
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Part of this was due to high-yield bond funds, which had £305m of inflows, while funds into sovereign bonds added up to £201m – double the monthly average of the last 12 months.
‘Investors were clearly weary’
Edward Glyn, head of global markets at Calastone, said: “February’s global equities marched investors to record heights and then marched them back down again, leaving them nursing losses for the month. Investors were clearly wary – inflows to equity funds were around half the monthly average for the last year.
“The fact that the UK stock market bucked the trend was seemingly immaterial to investors clearly bent on switching steadily out of domestically focused funds.”
Elsewhere, global funds produced net inflows of £2.09bn, while North American funds were £770m up in February, which continues the strong trend among the two sectors.
Glyn added: “UK investors are still structurally overweight on UK equities relative to the UK’s share of global market capitalisation, but the relentless purchase of global and North American funds is only increasing their exposure to the US market, and in particular, its Magnificent Seven stocks.
“This is not without risk, as the volatility in share prices of these big tech stocks in recent months shows.
“The surge in interest in bond markets was clearly spurred on by the buying opportunity presented by the exceptionally high yields on offer in January. Bond markets have calmed considerably since then, but investors who bought when yields peaked are already sitting on capital gains and have locked in at very attractive prices. If inflation once again slips its chains and makes another run for it, this rally could prove short-lived.”
