In April 2024, UK-domiciled funds witnessed a surge in net retail sales, reaching a staggering £2.8 billion, marking the highest sales since August 2021. This significant increase was primarily attributed to the influx of Individual Savings Accounts (ISAs), which encouraged savers to maximize their £20,000 personal allowance from the previous tax year or take advantage of the new year’s allowance for their investments.
The consistent preference for global equity funds remained evident, with a remarkable £1.3 billion inflow in April, mirroring the high from April 2021. This trend reflects diminishing fears of recession triggered by ongoing interest rate hikes. Anticipation of potential rate cuts later in the year, which generally promote higher share values and economic growth, also played a significant role in bolstering equities. Global equity funds continue to appeal to investors seeking diversified exposure to various markets at a lower cost, underscored by the significant contributions from tracker funds.
Miranda Seath, Director of Market Insight & Fund Sectors at the Investment Association, commented on the positive inflows, stating, “The positive inflows for April signal the green shoots of investors’ increasing confidence.” Seath attributed the sharp rise in inflows partly to the new tax year, with robust ISA sales during April as investors sought to maximize their personal allowances.
Tracker fund sales reached a record-breaking £3.8 billion in April, a significant achievement after the toughest two years for fund flows the industry has ever witnessed. Cost-conscious investors topped up their ISAs, favoring global equity trackers. This aligns with the results of the IA’s recent ISA survey, which revealed that despite the continued high cost of living, 38% of investors ended this tax year having invested more than in the previous tax year.
As the UK approaches its election on July 4th, it remains to be seen how the results will impact investor attitudes, particularly with regard to the demand for UK equities, which have experienced outflows throughout Q1. The next elected government will face limited fiscal headroom and the challenge of balancing competing spending priorities. However, despite these constraints, there is an opportunity to restore stability to the UK economy as inflation continues to ease and tentative growth is observed.
The outcome of the November elections in the US is also highly significant for markets. Regardless of the winner, we could see increasingly protectionist policies aimed at boosting American industries. The recent implementation of 100% tariffs on Chinese electric vehicles further indicates a shift away from the globalized, integrated supply chains of the past.
In April, global funds dominated overall inflows as UK investors sought global diversification. As election results roll in around the globe, investors and markets will be closely monitoring the implications for the global economy.
