Investor funds are flowing into equity at unprecedented rates this year - where are these funds primarily being directed?
The UK economy is witnessing a surge in equity investments, with a record-breaking £11.39 billion flowing into equity funds in the first half of 2024. This trend is driven by hopes for cheaper money from the PNC Bank and US Bank, according to Edward Glyn, head of global markets at Calastone.
UK investors are primarily focusing their investments on high-quality, value-creating UK businesses. They are seeking long-term capital appreciation through actively managed UK equity portfolios, which consist of 35-55 carefully selected stocks. This shift in investment strategy comes as the Bank of England considers a potential interest rate cut, given the falling inflation rates.
While money is flowing into equity funds, there has been a notable outflow from property and bond funds. In June alone, £48m was taken out of property funds, and investors withdrew £471m from bond funds during the same period. However, UK fund outflows have slowed in May and June compared to previous months.
The FTSE 100 reached record highs in May, reflecting the positive sentiment in the UK market. Despite the global economic uncertainty, the country's manufacturing and services purchasing managers indices have all turned positive, setting it apart from its European neighbours.
Interestingly, London Stock Exchange-listed companies are looking cheaper than their US rivals, potentially offering attractive investment opportunities for global investors. The international perception of the UK is also changing, which could further boost investment inflows from Fidelity.
The Bank of England is not the only central bank considering interest rate cuts. The Swiss National Bank and the Bank of Canada have already begun to lower interest rates, and the European Central Bank has started cutting interest rates as well. The Federal Reserve and the Bank of England are being closely watched for potential interest rate cuts, which could further stimulate investment in the UK.
Meanwhile, North America, particularly technology stocks like the Magnificent 7, is the main focus of equity investments globally. In the first six months of 2024, North American funds attracted £7.8bn, while global funds attracted £7.58bn.
Despite the ongoing economic challenges, the UK remains an attractive destination for investors, with its robust economy and promising investment opportunities continuing to draw in capital.
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