Rising equity markets spurred a surprise jump in Direct to Consumer ISA inflows in Q1, according to market analyst Fundscape.

Fundscape said that because markets soared in the first three months of the year in a “blistering” start to 2024 ISA business boomed.

The US S&P500 was up 10% in Q1 - more than its growth in 2023, Fundscape reported - and the FTSE All World was also up by 7.6%.

Rising markets resulted in a jump in investor confidence and a rush of ISA money at the end of the 2023/24 tax year.

Because of market boost D2C platform assets rose by almost £19bn to £338bn.

Gross sales for D2C platforms surged to £13.5bn as consumer confidence finally started to improve, eclipsing even the post-Covid boom period to deliver the highest gross sales since Fundscape records began in 2020.

Net flows of £5.2bn were “surprisingly buoyant”, Fundscape said. Net flowers were more than three times higher than the previous quarter and the highest volume in two years.

After several quarters in the low 20s, the net-to-gross sales ratio rose to 39%.

Hargreaves Lansdown and interactive investor were the largest platforms by a clear margin but Vanguard also recorded the highest net flows in the market and was in third place for gross sales, outperforming larger platforms.  

Martin Barnett, head of content at Fundscape, said: “It’s a well-known trope in retail investments that the ISA season sets the tone for the rest of the year. This is particularly so with poor ISA seasons, which inevitably herald lacklustre years and muted flows. But this year’s ISA season turned out to be a barnstormer – breaking all records for gross flows and posting the best net flows since 2021.”

Fundscape warned, however, that volatility was still a dominant feature of markets with numerous geopolitical events in the headlines that could “crush” burgeoning positive sentiment.

The prospect of interest rate cuts seems to be subsiding and commentators are now predicting only one cut later in the year, Fundscape said.

Fundscape also said that while interest and savings rates remain high, cash and cash-like solutions will compete with the D2C market.