New data has revealed that UK investors have pumped record amounts of cash into US equity funds this year while pulling cash from the domestic market, in another troubling sign for the health of the London Stock Exchange.
Equity funds notched record inflows in the first quarter of the year as £6.97bn was added between January and March, according to data from Calastone, the global funds network.
The figures highlight the chasm between the appeal of the domestic and US stock and the London Stock Exchange, the primary market for British investors.
US-focused funds absorbed £5.27bn of total capital, with more money added to US funds in the past four months than in the previous nine years combined.
UK equity funds meanwhile saw outflows jump to their highest level since February 2023, capping off 34 consecutive months of net selling.
“UK equities are certainly cheap, but investors worry where the growth is going to come from to drive earnings higher,” said Edward Glyn, head of global markets at Calastone.
“Add a relentless narrative of gloom about the prospects for the London stock market and it’s hard to persuade anyone to hold UK-focused funds.”
Glyn added that London-listed companies have been “left in the dust” by the growth of Japan, the US, and Europe. Those indices have all risen by more than a quarter since the end of October, while the UK’s top 100 has eked out just 8.6 per cent over the same period.
In recent years, outflows from equity funds have hammered valuations on the London Stock Exchange and forced fund managers to sell shares to meet demand.
UK investors yanked £8bn from domestic stock funds last year after pulling out the same amount in 2022 and £1bn in 2021. In that time, they have injected £24bn into non-UK focused equity funds
The numbers will unsettle policymakers and regulators as they look to encourage more cash into the London Stock Exchange.
Efforts are underway to push more retail investors and pension cash into the market, with the launch of a British ISA by Jeremy Hunt in the Spring Budget designed to try and boost its appeal.