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Record inflows into equities as “fear receded” in April

equities_coronavirus_marketsEquity funds saw a flood of new capital in April as stock markets rebounded, according to the latest data from fund transaction network Calastone.

A “record” £2.6 billion (€2.9 billion) flowed into equities throughout the month – almost six times the monthly average inflow recorded by the firm over the last five years.

Most of the buying took place in the middle of the month as evidence began to emerge that the Covid-19 outbreak was beginning to slow down in some of the worst-hit European countries, but by the end of the month, inflows slowed to a trickle as caution set in again, according to Calastone.

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.”

“High trading volumes reflect the exceptional uncertainty in global markets – as the pandemic crisis has unfolded, investors have had to constantly assess and reassess the valuation of assets and prospects for the economy.”

Active equity strategies saw much busier two-way trading throughout the month, with the total trading volume almost three times greater than passive in April, despite net inflows being split at almost 50:50.

Fixed income also saw inflows to the tune of £461 million, following the “unprecedented” £3.6 billion of redemptions in March, as calm was restored in bond markets.

Mixed asset funds also saw inflows of £602 million, but real estate funds remained closed, so there was no activity, Calastone reported. Money market funds were the only category to see outflows, as investors switched out of cash-equivalents and into riskier assets.

Global funds took in the lion’s share of new cash, adding a total of £1.1 billion, closely followed by UK-focused funds which added £1 billion.

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

Glyn added: “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.”

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