LONDON UK investors backed money market funds in May at the fastest rate since the country's failed 'mini-budget' last year, opting for caution after a volatile period in global banking, funds network Calastone said on Tuesday.

Calstone's fund flow index showed net inflows to money market funds of 419 million pounds ($521 million) during the month - the highest since October 2022, soon after then prime minister Liz Truss' government laid out short-lived economic plans.

The data also showed that environmental, social and corporate governance-focused equity funds suffered their worst month on record, shedding 304 million pounds of capital. May was only the second month to see net selling in this area in more than five years, Calastone said.

As savers have sought better returns on their cash and reduced risk after a series of bank failures, money market funds globally have seen huge inflows - particularly in the U.S.

"Money market funds invest in bonds with very short maturities, so they are typically among the least risky assets available," Edward Glyn, head of global markets at Calastone, said.

"Wobbles in the US banking system have reminded investors of the risks of having bank deposits above insured thresholds too, leaving money markets as an obvious place for wealthier individuals to park surplus cash."

UK investors continued to invest in bond markets, albeit at a slower rate as volatility dampened demand. Investors added a net 318 million pounds during the month, half the average of the last year, Calastone said.

Equity funds suffered net outflows of 302 million pounds, meanwhile, marking a sharp reversal after strong inflows in March and April. UK-focused funds were particularly hard hit, seeing outflows of 583 million pounds.

($1 = 0.8045 pounds)

(Reporting by Iain Withers; editing by Barbara Lewis)