UK equity funds suffer worst quarter ever as investors pull billions
UK-focused funds suffered their worst ever quarter on record over the last three months, despite a strong performance from the FTSE 100 and other UK equity markets.
Over the first three months of 2025, investors pulled £3.5bn from UK funds, with £1.2bn being withdrawn in March alone, according to data from Calastone.
“Instead of putting money into the UK, investors were buying the dip in US equities – that trade hasn’t aged well,” noted Peel Hunt head of research Charles Hall.
Throughout March, UK investors piled £1.8bn into North American equity funds, their strongest month since March 2024 and the third best on record.
Investors overwhelmingly opted for index trackers, which attracted £8 of every £10 of the inflows to North American equity funds.
Notably, the volume of transactions in North American equity funds was especially large, indicating a strong disagreement between bulls and bears.
Buy and sell orders totalled a record £7.8bn, 47 per cent more than the average monthly volume for over the last year.
“The strong appetite for US equities in March is at odds with tidal forces in global markets that are seeing a strong rotation out of US assets and into markets like Europe and the UK,” said Edward Glyn, head of global markets at Calastone.
“It may well be that some investors judge the recent falls to be a dip worth buying.”
Across all equity funds, UK investors deposited £1.4bn in March, despite ongoing market turmoil in the run-up to US president Donald Trump’s unveiling of sweeping tariffs at the start of this month.
However, the market did seem to take into account the inflationary affects of the tariffs by selling out of US Treasury funds, with bond funds losing £700m throughout March, the worst month since September.
In contrast, safe-haven money market funds brought in £513m in new cash, leading the first quarter of 2025 to be the best quarter on record for the second.
Meanwhile, property funds continued their decline in March, with investors withdrawing £98m throughout the month, in line with the average over the last two years.
“With the sector suffering structural outflows it is hard to disentangle market sentiment from the sector’s decline, but economic weakness is not supportive for commercial property, so fears of a global slowdown are likely to be playing a role,” added Glyn.