The global stock market rout at the beginning of August pushed investors away from equity funds before they returned more cautiously later in the month.
Just £545 million was invested in equity funds last month, according to the latest funds flow data from the data specialist Calastone, the lowest level since November and marking a significant drop on the £2.19 billion invested in July.
Global stocks came under severe selling pressure in the first few days of August when investors were given indications of a setback for the American economy. Data showed hiring falling sharply and the unemployment rate rising for a fourth straight month.
These raised fears about America’s growth prospects and the possibility that the US Federal Reserve, which decided to hold interest rates at a 23-year high of 5.25 per cent last month, would be forced to play catch-up by cutting rates this month.
The weak data weighed further on sentiment that had been soured by downbeat earnings updates from Amazon, the online retailing giant, and Intel, the chip maker.
In a further sign of caution, Calastone said investors stashed £593 million in money market funds in August, the highest in a year.
However, while £206 million was pulled from equity funds in the first three days of August, this quickly bounced back and later settled into more subdued inflows, the research showed.
“Investors flinched when global markets convulsed in early August,” said Edward Glyn, head of global markets at Calastone. “Outflows turned to inflows as markets calmed and sellers melted away, but nerves have clearly been rattled.”
He argued that the weaker month-on-month figure for UK-focused funds, which showed UK investors had pulled £510 million from their equity holdings last month, should be seen in this context. While that figure is more than double July’s outflows, it is still below the monthly average of £660 million for the past three years.
Flows into global equity funds fell to £639 million, while flows into North American equity funds halved to £564 million. A similar pattern was seen in other markets: flows into European funds were down 58 per cent to £155 million and emerging market fund flows tumbled 59 per cent to £174 million.
Asia-Pacific funds suffered a 16th consecutive month of outflows, which almost quadrupled to £184 million last month.
Glyn said it was “not yet time to break out the champagne”. He said: “The government’s gloomy statements about the UK’s allegedly dire predicament are hardly going to boost confidence.”
Research from Fidelity International, the asset manager, showed that it had witnessed a “classic shift towards safety” from clients last month, pulling back from technology funds and moving towards money market funds and more diversified and defensive assets as they seek “broader exposure amidst economic uncertainties”.