2021 Flows: Investors Pile Into Equity Funds as Markets Rise

Written by: Emma Wall | Hargreaves Lansdown

Investors pile into equity funds as markets rise, according to the latest set of Investment Association (IA) data, released today. 

The key findings for 2021 in the fund market show:

  • Inflows to responsible investment funds totalled a record £16bn, up £4.3bn on 2020.
  • Most inflows in the retail fund market went to active funds in 2021, with active funds pulling £25.2bn, compared to £18.3bn to tracker funds.
  • Outflows from UK equity funds reached a record £5.3bn in 2021 - larger than the previous record of £4.9bn in 2016, when the UK voted to leave the European Union.
  • Equity, fixed income and mixed asset funds all saw inflows of more than £10bn each, with equity funds being the most popular asset class in 2021 (£14.8bn).

It’s fantastic to see so many investors putting money into equity funds over the last 12 months and participating in the rally that was 2021. Preference was given to responsible investment funds, proving that 2020 was no one year trick pony and that this structural trend is here to stay. The real test however, for both responsible funds and equity funds across all sectors, will be the coming 12 months when we expect to see increased market volatility and for many markets, negative returns. 

Investors should hold tight, remain focused on their long term goals and ensure that their portfolios are diversified across asset classes, geographies and styles to help mitigate losses.  Early signs from our top fund buys in January on the HL platform show that investors are doing just this, with a mix of multi asset, equities and commodities funds making the top ten.

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