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May 06, 2021

UK retail investors warm to domestic companies in March

Savers also pour record funds into responsible investments, according to data from the Investment Association

UK retail investors are feeling more confident about the prospects for domestic companies amid a rapid vaccine roll-out and improving economic conditions, according to new data.

In March the country’s savers invested a net £472 mn ($655 mn) into funds in the UK All Companies sector, says the Investment Association (AI) – the first net inflows for six months.

Savers also put a net £217 mn into the UK Smaller Companies sector, more than the total net inflows from the previous three months.

UK companies, broadly out of favor during 2020, have seen their fortunes change thanks to the successful deployment of Covid-19 vaccines and a rebound in economic activity, with the Bank of England predicting GDP growth of 7.5 percent in 2021.

British stocks are also benefiting from reopening and inflation trades, given the large number of energy and mining companies represented in the FTSE 100.

‘While most money has gone into larger UK companies, the recent stellar performance of some of the UK’s smallest businesses hasn’t gone unnoticed, with a pick-up in flows into UK Smaller Companies funds,’ says Kate Marshall, acting head of investment analysis at retail broker Hargreaves Lansdown, in a statement.

‘These often fare better when investors are in ‘risk-on’ mode, and that’s exactly what we’ve recently seen.’

Overall, March saw a net £4.4 bn in retail sales, compared with -£9.7 bn in March 2020 when the Covid-19 outbreak was declared a global pandemic.

The most popular sectors for retail investors last month, according to the IA’s official categories, were Global (£1.6 bn in net sales), Mixed Investment 40 percent to 85 percent Shares (£1 bn) and Volatility Managed (£483 mn).

The Sterling Corporate Bond sector, meanwhile, saw the biggest outflows at £1.5 bn.

The data from the IA also underlines the popularity of responsible investment funds among retail investors. These funds recorded net retail inflows of £1.6 bn in March, the highest number on record.

At the end of the first quarter, responsible investment funds under management stood at £66 bn, translating to a 4.5 percent share of the overall UK funds industry — another record high.