Retail investors bought £1.2bn of investment funds in February, down from £3.7bn in January and compared to a monthly average inflow of £3.9bn last year, according to latest industry data from the Investment Association.
In a reversal of recent form, investors withdrew £235m from fixed income funds, down from a net inflow of £1.6bn in January and compared with a monthly average inflow of £1.2bn last year.
Equity funds saw a net outflow of £69m, with positive flows into Europe, Asia and Japan being offset by a £510m withdrawal from UK Equities.
Commenting on the findings Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “The boom in fixed income fund sales came to an abrupt end in February, significantly weakening overall fund flows.
“The tantrum we saw in markets at the beginning of the month was prompted by fears US interest rates might rise faster than expected, which clearly dampened the mood of fixed income investors.
“The popularity of bond funds has been masking a gradual exodus from UK equity funds that has been taking place ever since the EU referendum and continues apace today, with another £510m walking out of the door in February.
“Equity sales actually fell backwards across all regions, no doubt a result of the volatility we saw returning to markets after a strong run last year.”
He added: “Money continues to flow into mixed asset funds and we can expect this to continue, as pension auto-enrolment cranks up a gear this month, with contributions rising for both employers and employees.
There is always something on the macro-economic stage to worry about and right now it’s the escalating trade spat between the US and China.
“However more broadly, economic conditions remain benign, as monetary policy is still accommodative and global growth is expected to pick up this year.
“This backdrop should be supportive of company profitability and hence equity market prices, though of course in the short term sentiment will play its part too.”