UK equity funds saw £6.2bn in net inflows in the second quarter this year, close to matching net flows for the whole of 2020.
The inflows compared with £3.9bn invested in the first quarter this year, and £7.7bn invested throughout 2020, according to funds network Calstone.
April saw the highest level of investment into equity funds when £3bn was added. Just over £2bn was invested in May and £1.1bn was added in June.
The past 12 months have seen £15bn of net inflows into UK funds overall, the highest since 2015.
Edward Glyn, head of global markets at Calastone, said: “UK savers have salted away an extra £192bn in their bank accounts since the pandemic began.
"Not much of this enormous cash surplus needs to reach investment funds before it smashes records, which explains why investment funds have had such a strong run of inflows over the last year, especially equities.”
However, Glyn added he had recently seen some nervousness, including a slight slowing of investment into UK funds in June. Around £6.3bn was invested overall in April, dropping to £3.3bn in May and £2.6bn in June.
Glyn said: “For the medium term, financial markets are weighing up whether the blistering speed of this business cycle means it is already time to look beyond to the inevitable economic cooling.
“A change in sentiment like this also impacts the relative attractiveness of more value-orientated markets like the UK, which benefit from a bit of inflation.
“It is not yet clear whether the ‘reflation trade’ has further to run, as the short-term prospects are clouded by the Covid-19 third-wave risks.”
ESG funds in the UK stood out in the year-to-date, accounting for half of all inflows to UK funds.
Just over £2.1bn was invested in these funds in the second quarter of this year, compared with £2.9bn in Q1 and £4.9bn in 2020 overall.
Glyn warned ESG funds might have peaked however.
He said: “As for ESG funds, even though the inflows remain extremely strong, they seem to be levelling off in recent months, an Isa-driven burst in March notwithstanding. This does not mean the ESG investment boom is over. Not by a long chalk.
“But exponential growth in inflows can only go on so long. Fund managers will be content if flows can stay at this elevated level for a prolonged period.”
sally.hickey@ft.com
