Investors put £553m into funds in April following £3.5bn outflows the month prior, but net sales were still negative among equity funds, according to the latest data from the Investment Association.
Around £435m was removed from equities in the fourth consecutive month of outflows, the second-worst month of the year so far behind its £1.6bn loss in January.
The IA UK All Companies sector had the biggest outflows at £486m. It means that the sector has suffered nine consecutive months of outflows, with investors last adding more money to the sector in July last year.
It was a similar story for the IA UK Smaller Companies sector, where £172m was withdrawn in April – the eighth consecutive month of net outflows.
The IA UK Equity Income sector was slightly better off. Investors took out £31m in April from the sector, although it has failed to garner new money since May 2020.
Almost £4bn has been removed across all three UK sectors since the start of the year, and it was the worst hit region in April with all UK funds recording £689m in outflows.
On the flip side of this, the Global Equity Income funds were the most popular among investors in April, with inflows totalling £678m throughout the month, overtaking the IA Global sector which lost £216m.
Miranda Seath, head of market insight at the Investment Association, suggested that the increased popularity of these funds was due to investors seeking new sources of income as markets appear volatile.
She said: “As the outlook for equity growth weakens, investors have looked for funds investing in companies that pay good dividends consistently to top up the overall returns equity investors receive.”
Global equity income funds have received the highest inflows this year, with investors adding a net £1.4bn since the start of 2022.
Away from equities, infrastructure funds were the most popular choice among alternative portfolios, with inflows of £121m.
Investors have put £384m into these funds since the start of the year, whilst only allocating £270m into Commodities which have performed better over that period.
Indeed, the IA Commodity/Natural Resources sector is up 20.7% so far in 2022, while IA Infrastructure is trailing 13.9 percentage points behind at 6.8%.
Total return of sectors since start of the year
Source: FE Analytics
Although commodities outperformed, it is often perceived as a cyclical sector and returns are often more volatile. These fund are also reliant on capital gains, while infrastructure is more income based, something that may be attractive to investors as the cost of living crisis squeezes the purchasing power of savings.
In the fixed income market, corporate bonds were the least popular area as many companies have been put under pressure by higher operating costs, with outflows dropping to £363m.
The fixed income sector as a whole recorded losses of £18m as lower bond yields put investors off, but it is an improvement from the £5.7bn in losses between February and March.
The overall figures for April were boosted by a rise in the amount invested through ISAs. Following the worst quarterly outflow on record in the first quarter at £7.1bn, people invested £683m through ISAs in April.
These ISA inflows may have given funds a welcome boost after the terrible first quarter but is a stark contrast from the £1.4bn of ISA investments in April last year.
Emma Wall, head of investment analysis and research at Hargreaves Lansdown, said: “After the significant volatility of March, caused in part by the terrible events in Ukraine, investors returned to markets in April – tempted by the tax year-end deadline to make the most of their tax-efficient wrappers.”