Salford-based invest platform AJ Bell said UK equity funds have now endured a decade of outflows totalling £71 billion, citing the latest data from the Investment Association.

UK equity fund outflows in 2025 calmed somewhat, experiencing their “best” result since 2021 — however flows remained negative with £11.1 billion of outflows.

Active funds saw £15.1 billion of outflows in 2025 — nonetheless their best showing since 2021.

Passive funds continued to see inflows — to the tune of £12.8 billion in 2025. Money market funds saw record inflows of £6.9 billion

Laith Khalaf, head of investment analysis at AJ Bell, said: “UK equity funds have had a dismal decade, witnessing 10 years of relentless outflows totalling £71 billion. Part of this can be explained by the shiny lights in Silicon Valley attracting money to the other side of the Atlantic.

“Part can be explained by the fact that DIY investors feel more comfortable investing in individual stocks in their domestic market, so they have less call for a fund manager to do this for them.

“However a big part of the story lies in the shift towards passive investment strategies and the global benchmarking of portfolios. The UK stock market makes up just under 4% of the MSCI World Index, and yet the UK All Companies fund sector is the second most popular after the Global sector, with £147.8 billion of assets.

“This means that despite a decade of outflows, UK fund investors are still heavily overweight UK stocks compared to global benchmarks. This is a legacy of a time when there wasn’t so much supply of overseas offerings from fund groups, or so much demand from investors, and UK equity funds ruled the roost. The unwinding of this overweight position may therefore yet have a long way to run.

“Strong performance from the UK stock market in 2025 doesn’t seem to have stemmed the tide. £11.1 billion of outflows speaks for itself, and suggests the rally in domestic stocks was heavily influenced by overseas buyers, rather than demand from UK fund investors.

“If that scale of outflows happen in a year of strong performance, there won’t be many newly qualified investment managers gagging to score a job on a UK equity desk, nor many fund groups seeking to employ them for that matter. That will only serve to further entrench the shift away from UK equity funds.”

The data released by the Investment Association (IA) showed net retail outflows reached £2.3 billion in 2025, on par with 2024.

“Throughout the year, markets showed resilience with robust performance leading to a 9% annual growth in funds under management (totalling £1.62 trillion, increasing from £1.49 trillion at the end of 2024),” said the IA.

“While this did not translate to an annual inflow, some asset classes, including money market, mixed asset funds and fixed income, saw consistent flows throughout 2025 as investors adopted a risk-off sentiment.

“The first quarter recorded £2.3 billion in redemptions, followed by £4.7 billion inflows in Q2 – the only quarter in 2025 recording total net inflows. Monthly inflows peaked at £3.3 billion in May, boosted by ISA season and investors ‘buying the dip’ in the wake of Trump’s ‘Liberation Day’ and tariff policy.

“The second quarter also saw money market fund inflows peak at £2.6 billion. The popularity of the asset class reflects a ‘wait and see’ response to geopolitical tensions, as investors and professional advisers favoured cash-like investments for their flexibility and liquidity. Indeed, Short-Term Money Market funds were the best-selling sector for 2025, leading sales in every quarter after the first, when North American equity funds briefly took the top spot.

“Outflows in the third (£2.7 billion) and fourth (£2.0 billion) quarters reflected both the growing uncertainty over an equity market correction and persistent speculation over tax changes in the two months up to the Budget.

“Equity funds saw -£16.8 billion flow out over 2025 due to many investors becoming increasingly cautious about high exposure to large cap US tech stocks as speculation grew that an AI bubble could cause a correction in their valuation. North American equities saw particular redemptions in H2 (£2.0 billion) while Global equity funds, many of which have significant exposure to the largest US tech companies, saw -£4.8 billion flow out across the year.

“This sentiment mildly benefited European equity funds, which reached inflows of £761 million as investors looked to diversify. UK equity outflows calmed somewhat, experiencing the best result since 2021. Although, flows remained negative for the region at £11.1 billion.

“Outflows reached their peak at £4.6 billion in October amidst speculation about potential changes to pensions in the Budget, a pattern repeated from 2024, as investors took their tax-free lump sums. While uncertainty over tax changes has negatively affected investor confidence for two successive years, the final two months of 2025 ended on a firmer footing, supported by inflows in November (£606 million) and a stronger December (£2.0 billion).  ”

IA’s key findings for 2025:

• Money market and mixed asset funds emerged as the year’s bestselling asset classes, attracting inflows of £6.9 billion and £4.5 billion respectively. Investors prioritised diversification and stability amid heightened geopolitical and policy uncertainty. Short-Term Money Market funds were the best-selling sector in 2025 (£6.1 billion).

• Equity funds recorded £16.8 billion of outflows in 2025, higher than 2024 but below the record withdrawals of £22.4 billion in 2023. North America and Global suffered significant redemptions in the face of concerns about allocating more to strategies with exposure to large cap technology stocks, with global equities seeing £4.8 billion of outflows over the course of 2025.

• Fixed income funds posted £1.1 billion of inflows over the year, down from £3.6 billion in 2024. Bond funds saw inflows through the second half of 2025 as investors adopted a more risk off sentiment and diversified away from equities. Mixed Bond funds were the most popular with £1.2 billion in net inflows over the second half of the year.

• Tracker funds attracted £12.8 billion of inflows in 2025, down from a record £27.6 billion in 2024.

• Actively managed funds saw outflows ease significantly to £15.1 billion, compared with £29.9 billion in 2024.