Investors pile into funds after Covid vaccine breakthroughs

The announcement of three safe and effective Covid-19 vaccines drove a near-record flood of money into equity funds in November, according to fund settlement service Calastone.

Investors poured a net £2.3bn into funds investing in shares, as the prospects for an economic recovery and an end to the pandemic became clearer.

That marked the second highest monthly inflow on record for equity funds, only behind April this year when markets rallied strongly following March’s crash. Actively-managed funds were the biggest beneficiaries.

Active equity funds enjoyed their best month of inflows in more than five years, pulling in £1.6bn of new money according to Calastone, which has tracked monthly fund flows data since 2015. 

Edward Glyn, Calastone’s head of global markets, said it was clear that the long-awaited vaccine news had sparked the pronounced and rapid dash into risk assets.

‘Despite languishing in renewed lockdown confinement, investors went off to the races to celebrate. Record fund turnover, record inflows for some of the biggest equity fund categories and near-record inflows for equity funds overall add up to a huge sigh of relief that the end may finally be in sight for the pandemic and its devastation of the global economy,’ he said.  

Flows were strongly concentrated in the days immediately after news of positive trial results for Pfizer (PFE.N), Moderna (MRNA.O) and AstraZeneca (AZN) vaccines, reflecting how direct a boost to investor sentiment they proved.

In the five days before the announcement on 9 November of promising data for the Pfizer-BioNTech shot, which the UK began rolling out yesterday, equity funds endured outflows of £389m as investors weighed the uncertain outcome of the US election.

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In the five days after the announcement, that strongly reversed as inflows totalled £1.4bn. Equity funds took another £897m on board in the five days after the Moderna news, while Oxford University and AstraZeneca’s announcement spurred £429m in the five days afterwards.  

Much of that money went into global active strategies, which hauled in an all-time record £1.5bn over the month. 

The £14.5bn Morgan Stanley INVF Global Opportunity led the way, pulling in £654m over the month, while Terry Smith’s £22.7bn Fundsmith Equity took in £444m, according to Morningstar.

As out-of-favour ‘value’ stocks in areas like banking and energy enjoyed the biggest monthly bounce, fund investors also returned to these areas. The £1.5bn Robeco BP Global Premium Equities fund was on the receiving end of £530m of fresh cash, while the £2.6bn M&G Global Dividend fund enjoyed inflows of £261m.  

Emerging markets and north American funds were also the recipients of fresh capital, but the UK remained unloved. UK funds endured outflows of £465m, according to Calastone, despite the FTSE 100 enjoying its best month for 31 years in November. 

There were £713m net inflows into index-tracking passive funds, almost exactly in line with monthly average over the last year.

Glyn explained the different dynamics driving active and passive flows.

‘Anchored in monthly savings plans, index-tracking fund flows tend to be steady and positive, but active funds benefit much more when there is a big positive swing in sentiment,’ he said.

Reflecting the shift into riskier assets, safe-haven money market funds saw the biggest outflows on record, shedding £695m.

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Calastone also pointed out that the large inflows for funds investing in shares came on the back of huge turnover, suggesting high levels of switching between funds as investors reappraised the economic outlook.

Investors placed buy and sell orders buy and sell orders totalling £24bn, making November only the second month on record that turnover in equity funds had exceeded £20bn, the first time being in March as markets crashed.   



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