In February, British investors demonstrated unprecedented enthusiasm for U.S. equity funds, channeling over 2.5 billion pounds ($3.17 billion) into these investments, marking a record influx not seen in at least nine years, according to fund network Calastone.
This surge was largely fueled by the stellar performance of tech stocks, propelling American markets to unparalleled heights.
The excitement surrounding artificial intelligence and anticipations of the Federal Reserve slashing interest rates have contributed to a robust rally, pushing the S&P 500 and Nasdaq indices to surpass their previous peaks and reach new record highs.
Edward Glyn, Calastone’s head of global markets, captured the sentiment by stating, “Risk is back on with a vengeance,” highlighting the significant uptick in U.S. stock market performance, particularly driven by the tech sector.
Contrastingly, British investors’ appetite for domestic stocks remains tepid, with February witnessing a withdrawal of 633 million pounds from UK funds.
This trend signals a potential fourth consecutive year of capital flight from the UK market, underscoring a persistent reluctance among investors to bolster their home market’s equity funds.
Despite a slight improvement in the UK stock market, Glyn remarked, “nothing can persuade UK investors to add capital to their home market.”
While the feverish acquisition of U.S. equities unfolds, investors maintained a level of interest in money market funds and bond funds.
Money market funds attracted 78 million pounds, a figure notably below the 400 million pound monthly average of 2023.
Meanwhile, bond funds experienced a surge in popularity, amassing 329 million pounds in February alone, marking their most successful month since June 2023.
Although Calastone’s data, primarily reflecting retail investor activity, doesn’t encompass all market movements, it provides a significant insight into the current trends of UK investment flows.