UK investors pulled back sharply from equity funds in May, with net inflows falling to £525 million—down from £1.52 billion in April and roughly half the average monthly inflow over the past three years.
The figures, released in global funds network Calastone’s latest Fund Flow Index, suggested selectivity in equity allocations and a cautious stance on global markets.
European equities bucked the trend, posting their strongest month since June 2024 with net inflows of £369 million. In contrast, global equity funds attracted only £546 million—around a third of their usual monthly average—while US-focused funds recorded a modest £115 million, the second-lowest figure since September last year. Investors continued to retreat from emerging markets and Asia, maintaining a risk-off posture in those regions.
While UK-focused equity funds still saw outflows in May, the pace slowed for the second month running. Net redemptions dropped to £449 million, down from the three year monthly average of £862 million. According to Calastone, buy order values remained stable, suggesting the slowdown was driven by reduced selling rather than increased enthusiasm.
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Fixed income, on the other hand, returned to favour for the first time since February. Investors added £328 million to bond funds in May, reversing £1.94 billion in outflows seen during March and April. Sovereign bond funds captured the bulk of this shift, drawing in £182 million as higher yields lured buyers back to longer-duration assets.
The relative appeal of bonds also weighed on demand for money market funds, which have attracted flows recently as a safe haven, shared Calastone.
Edward Glyn, head of global markets at Calastone said: “Global markets enjoyed strong gains in May as the Trump administration retreated from its extreme positions on tariffs. Investors bought into the rally but not with any great confidence. With so much uncertainty over inflation, interest rates, geopolitics and trade wars, it seems rational for investors to be cautious. Certainly, investors are being selective with where they put their capital.
The UK stock market is flirting with the all-time high it reached in February this year. This recovery has not been enough to spur new buyers to reappraise the prospects for UK equities, but it seems to be reassuring some would-be sellers that perhaps the long-awaited re-rating is underway. The relentless outflows from UK-focused funds in recent years represented a clear capitulation on hopes for UK shares. It’s too soon to call an end to this trend, but a less negative narrative is a necessary first step.
Bond yields climbed strongly during May, suppressing bond prices, as concerns over government solvency and inflation took their toll, but they clearly reached levels tempting enough to spur investors to lock new capital into high yields.”