According to figures from the Investment Association released yesterday (July 1), European equity funds saw net inflows of £101m compared with outflows of £74m in April.
This marked the first time the funds saw inflows this year, with a collective £912m withdrawn since January.
North American equity funds also saw a rise in net inflows, seeing £206m invested throughout the month, higher than the £23m invested in April.
Comparatively, UK equity funds saw around £571m withdrawn in May, compared with inflows of £51m in April and £114m in March.
Asian equity funds also saw a dip in investing, with £59m invested in the funds in May, lower than the £244m seen in April.
Kate Marshall, acting head of investment analysis at Hargreaves Landsdown, said: “Optimism towards European markets has returned.
“[This] follows a recent period of strong performance from European stocks, aided by the fact some European countries are getting a better hold of the coronavirus outbreak and are finally making some headway in rolling out vaccines after initially lagging other developed nations.”
However, she added the UK funds’ reversal in fortunes was clear.
“UK equity income was the least popular sector in May and has continued to face challenges after a difficult year for many dividend-paying companies hit by coronavirus restrictions.”
It was a slow month overall for net retail sales, with £3.5bn invested in May compared with £6.2bn in April.
Property funds also suffered, with £184m withdrawn overall in May, as the sector continued to struggle with liquidity.
Mixed asset funds were fairly stable, posting inflows of £1.2bn for the period, compared with £1.5bn seen in April.
Laith Khalaf, financial analyst at AJ Bell, said: "Whatever happens in the football, it looks like investment isn’t coming home.
"After two months of mildly positive inflows, UK equities were back to business as usual in May with a £0.6bn outflow, and that includes a positive showing from UK smaller companies funds.
"Flows into the mixed asset sector came top of the charts but were actually down on the previous month, which suggests that overall investors are a bit directionless at the moment, as the baton gets handed from crisis to recovery."
Chris Cummings, chief executive of the Investment Association, said there was still room for optimism, however.
“The overall mood remains positive as we head into the summer,” he said.
“In response to European stocks performing well, UK savers invested £101m into Europe funds – the first month of inflows to this region this year.
"Elsewhere, it was encouraging to see that demand for responsible investment funds remains high, reaching flows of £5.5bn year-to-date.”