Wednesday 9 December 2020 12:22 pm

Vaccine optimism spurs near-record equity inflows

The long-awaited announcement of effective vaccines saw investors pile back into equity funds last month at a near-record level. 

Renewed optimism among investors saw a net £2.3bn added to equity funds, according to fund network Calastone’s latest data. 

Read more: Active funds pivot to ESG in bid to fight off passive trackers

It is the second highest month of inflows on record after April 2020 when investors welcomed coronavirus financial packages with open arms. 

Investors have in recent months turned their back on UK equity funds as fears over Brexit returned and the economic impact of the pandemic was keenly felt.

Investors piled £1.4bn into riskier equity funds in the five days after Pfizer’s vaccine announcement, compared with outflows of £389m in the preceding five days. 

Another £897m flowed in in the five days following Moderna’ announcement while the Oxford/Astrazeneca news prompted another £429m.

Active equity funds had their best performing month since July 2015 with £1.6bn of new capital. This helped reverse half of the cumulative outflows since May 2020, with most going into active global funds, which saw an all-time record £1.5bn of inflows. 

The increased interest in impact investing also saw ESG funds continue to break records. 

Investors added £820m of new capital in November which exceeded the total inflows during the five years to January 2020. 

Read more: Investors turn their back on UK equity funds due to Brexit jitters

Investors more bullish on property

Real estate funds have had a dire year as a result of fund suspensions triggered by the pandemic. They saw outflows of £284m, the fifth worst month on record, but it was considerably lower than the £340m seen in October. 

Despite the impact of a second lockdown, Calastone’s daily trading data showed that investors became more bullish in the second half of the month as a result of the vaccine news. 

“It’s rare that the economic prospects for the year ahead are this cloudy, but a rapid, successful vaccine rollout and a possible Brexit deal could ignite a pretty strong recovery and that will surely benefit the sector enormously as businesses get back on their feet,” said Edward Glyn, Calastone’s head of global markets.