UK equity funds enjoyed a resurgence in July as low interest rates and cash savings prompted a flood of new money during the typically quiet summer lull. After two months of net outflows UK equities saw a reversal of fortunes during the period, raking in £245m, making it the second-best selling region behind Global equity (£1.2bn). Higher sales were driven by UK All Companies funds, which attracted £295m from retail investors, offsetting net redemptions from UK Equity Income (-£46.5m) and UK Smaller Companies (£-3.6m). Though July marked UK equity income funds’ 14th consecutive month of net outflows, money exiting the sector has slowed dramatically from £231.6m in June, which The Investment Association (IA) chief executive Chris Cummings put down to the UK’s improving dividend picture. In total savers ploughed £4.8bn into funds in July, nearly three times higher than a year ago and slightly up on June’s net inflow of £4.4bn. Typically, we experience quieter months for net retail sales over the summer period, but this year we have seen consistent and robust inflows through June and July, which speaks to investor confidence being maintained and no rush to spend the savings accumulated during the crisis. We are still early on in the inflation story and have not yet seen any moves away from persistent low interest rates, which makes cash saving less attractive and has potentially helped fund flows in the near term. Some commentators believe that, as interest rates on cash accounts remain historically low and many people sitting on a healthy cushion of savings from the pandemic, we can expect to see more and more money funnelled into investments this year.

Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of September 2021 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.