Nervous investors pared back their fund buying in September as they "add to their rainy-day funds and fret about taking on more investment risk at a time of such uncertainty", according to global funds network Calastone.
Fund inflows across all asset classes in September were just £1.1bn, the firm said in its latest fund flows index, despite equity funds seeing their highest level of buying since May.
Investors poured £385m into equity funds - the highest level in four months - as global stockmarkets continued to rally, but a pull back in recent weeks halted momentum.
Indeed, Calastone's data show the majority of the buying took place in the first four days of September. Less than £400m came in during that period, with around £200m in the first week.
For the rest of the month, the asset class saw net outflows.
Elsewhere, flows into fixed income products fell sharply to £193m, with multi-asset at just £117m.
Edward Glyn, head of global markets at Calastone said investors were nervous. "The vast sums of cash accumulating in households' savings accounts are not finding their way into asset markets as savers both add to their rainy-day funds and fret about taking on more investment risk at a time of such uncertainty," he said.
That said, Glyn noted both "bright spots" and "no-go areas". ESG equity was a winner, which Glyn said showed "that an interesting story can still drive investor demand".
The ESG equity asset class in total, encompassing both active and passive mandates, saw £588m of inflows.
Active ESG equity vehicles saw record inflows of £392m, well outpacing their passive counterparts. Flows into active ESG equity funds have risen tenfold between Q3 2019 and Q3 2020.
Glyn said: "The huge quantity of ‘legacy' capital in traditional active equity funds means that fund managers are still thriving, despite the challenge posed by ever greater pressure on fees.
"By pivoting to ESG funds, they are not only capturing the Zeitgeist, but also bolstering their margins.
"There is enormous public interest as ESG goes mainstream, and active managers are able to differentiate these products much more effectively from passive funds, and they can charge premium fees as a result.
"It is astonishing that a fund category as small and unloved as ESG as recently as 2016 has been responsible for all the net new money flowing into active funds since then."
Regionally, global equity funds, taking in £831m of inflows, continue to benefit from a shift away from UK stocks, which have now suffered four consecutive months of outflows.
"UK-focused equity funds seem condemned to the doldrums unless the Brexit talks yield a positive outcome and income funds are out of favour while the dividend pain is prolonged," Glyn continued.