Calastone: ESG funds suffer record £953m outflows in August

investmentweek.co.uk:

Edward Glyn, head of global markets at Calastone, said the move out of ESG funds has gathered pace in a 'remarkable reversal' after the boom in recent years.

This takes the total withdrawn from ESG funds since May to £1.96bn, according to the latest Fund Flow index from data provider Calastone. Before 2023, only one month had seen outflows since the ESG boom began in early 2019.

Edward Glyn, head of global markets at Calastone said the move out of ESG funds has gathered pace in a «remarkable reversal» after the boom in recent years. 

«Four months of outflows signals a new trend emerging that fund houses will have to work hard to counteract,» he said.

«ESG funds are mainly actively managed, so they have offered a helpful bulwark against the rise of index funds. With ESG now tracking backwards, index funds are once again beating their active counterparts for new capital.

Calastone: UK investors shun stocks despite global rally

Elsewhere, the data shows investors piled out of equities and bonds in August and into safe haven money market funds.

Money market funds were the biggest beneficiaries of investor risk-aversion, adding £673m to their holdings, by far the strongest inflow since the immediate onset of the pandemic in March 2020, and the second highest on record.

Equity funds collectively shed £1.19bn in August, the worst since September 2022 and the seventh worst month on record.

Outflows were concentrated in the first half of the month when markets were at their weakest, but there was little concerted buying even as markets began to recover.

UK-focused funds were hardest hit, but US funds, income funds, European, Asian, country and sector funds all suffered outflows too.

With redemptions of £811m, UK-focused funds