UK remains out of favour as ISA investors pull money from funds

Investment Association fund flow data for July 2024, published today, shows:

IA funds saw inflows of £414 million in July 2024, although UK ISA investors withdrew £306 million.
Most popular sector in July was ‘Short Term Money Markets’ with inflows of £806 million, including £5 million from ISA investors.
Least popular sector overall was ‘UK All Companies’ with £655 million of outflows, including £119 million from ISA investors.
Nicholas Hyett, Investment Manager at Wealth Club, commented:

“Retail investors remain nervous, with ISA investors pulling over £300 million from funds in July. Despite lots of noise about how the UK stock market is trading at bargain valuations, the UK remains particularly unloved – with ISA investors pulling just over £160 million from UK focussed funds. Institutional investors remain pessimistic about the UK too, with the UK All Companies sector seeing the largest outflows of any sector at £655 million.

Bond funds and short term money market funds remain popular– as investors look to lock in the high yields on offer at the moment. Expectations of imminent rate cuts have probably helped here too – with the August rate cut by the Bank of England well trailed in advance.

These numbers highlight one of the key challenges faced by the new government if its to achieve its goal of reigniting economic growth. UK investors, big and small, are very sceptical about the potential returns on offer from UK companies, which has knock on effects on their valuations and reduces the incentive for businesses to list in the UK. That runs a real risk that the most promising UK businesses will move their centre of gravity overseas – seeking markets that are more appreciative of their genuine strengths.”