February sees £2.4 billion inflows as investors make a strategic return to North American equities

Net retail sales recorded inflows of £2.4 billion in February, a substantial increase on the £662 million recorded in January and marking the fourth consecutive month of inflows, according to data published today by the Investment Association.

In a rare instance, there was a higher inflow into actively managed funds (£1.5 billion) compared with index trackers (£890 million) as UK investors continue to favour fixed income funds over allocating to equity sectors.

Retail fund net sales in February rose to their highest level since May 2025 (£3.2 billion). In the first two months of 2026, investors were facing into relatively resilient economic conditions with inflation in the UK continuing to fall and generally positive equity market performance. However, the reporting period preceded the recent conflict in the Middle East and the spike in oil prices following the closing of the Strait of Hormuz, which means that the outlook for investors in April is far more uncertain.

In February, Equity funds continued to see overall outflows of £465 million, though UK investor demand varied significantly by region and sector. North American equity funds attracted sales of £417 million, the highest since April 2025 (£966 million), with continued inflows into North American tracker funds (£554 million). However, global equity outflows widened to £808 million at the same time as global trackers posted outflows of £236 million, following £479 million of inflows in January.

Despite some caution towards equities, other asset classes remained in demand. Fixed income recorded inflows of £824 million as investors continued to favour lower-risk allocations. The Global Emerging Market Bonds – Local Currency sector posted inflows for nine of the last 12 months, suggesting that despite elevated geopolitical risks, it continues to benefit from demand for diversification and a weaker dollar. Similarly, money market funds saw continued demand (£551 million) as investors continued focusing on managing risk. 

Key findings for February 2026

• Equity outflows narrowed to £465 million, an improvement on last month’s £1.9 billion. North America was the only region to record significant inflows (£417 million), while Europe saw modest inflows (£34 million) and Asia remained broadly flat (£2 million). 
• Money market fund inflows continued at £551 million in February, with Short-Term Money Market the best-selling sector of the month at £600 million. 
• Fixed income saw inflows of £824 million, up slightly from £444 million in January. The highest inflows were to the £ Strategic Bond sector (£175 million), Global Emerging Market Bonds – Local Currency (£114 million) and the UK Gilts sector (£139 million).
• Mixed Asset funds recorded inflows of £1.0 billion.
• Active funds attracted £1.5 billion of inflows over the month, driven by net sales to Fixed Income (£776 million) and Mixed Asset (£986 million), while active equities remained in outflows of £1.3 billion.
• Tracker funds recorded more modest inflows of £890 million, with equity tracker inflows of £874 million concentrated in North America (£554 million) and a rare inflow into UK All Companies tracker funds (£291 million).
• Across other sectors, Targeted Absolute Return saw inflows of £256 million, while Volatility Managed recorded strong inflows of £306 million.
• Responsible Investment Funds recorded outflows of -£516 million, with -£283 million from SDR labelled funds.

Investors return to the US, but risk sentiment polarised

Whilst equity funds saw outflows of £465 million in February, this marks a clear improvement on last month’s £1.9 billion. The shift was driven by investors making a tempered return to North America, as modest inflows across the European region (£34 million) and a third consecutive month of inflows to the Global Emerging Markets sector (£97 million) reinforce that some investors continue to allocate away from dominant US technology stocks.

Inflows to North America (£417 million) marked the highest figures since April 2025 (£966 million), a notable shift after a sustained period of outflows. This was supported by tracker flows, with North American equity trackers attracting £554 million, contributing to a broader move into equity index exposure. 

However, this renewed demand for North American equity funds reflects increasingly polarised investor behaviour, as strong recent US returns are weighed against concerns around high valuations, concentrated mega‑cap exposure and broader geopolitical uncertainty. Some investors remained cautious around the potential returns from AI investment, with similar concerns evident in dips in valuations for knowledge- and service-based industry sectors, including software and professional services, where business models may face disruption from AI-driven competition. This is reflected in outflows of -£130 million from the Technology & Technology Innovation sector. 

UK spotlight 

In the UK, equity outflows totalled £238 million, the smallest since June 2021. The UK All Companies sector saw modest inflows of £24 million, driven by tracker funds, which attracted £291 million – the first inflow to UK All Companies trackers since May 2025. UK All Company Active funds saw outflows of -£267 million.

The UK has benefited from a relatively stable economic backdrop in the months prior to the outbreak of conflict in the Middle East, with inflation at three percent and the Bank Rate held at 3.75 percent, as markets priced in potential rate cuts later in the year. Strong performance from large-cap stocks, particularly in sectors such as healthcare, utilities and telecommunications, supported total returns of 6.5 percent for UK equities over the month, reinforcing that UK equity funds could benefit from some investors rotating away from more technology-focused markets. This follows a record year for the FTSE 100 in 2025, with total returns of 26% over the year.

Miranda Seath, Director, Market Insight & Fund Sectors at the Investment Association, said: 

“February marked a fourth consecutive positive month for net retail sales, with inflows reaching £2.4 billion. Investor confidence has been gradually rebuilding. While some hesitancy towards equities remains, investors are selectively re-entering the US market through equity trackers, whilst continuing to allocate to European and global emerging market equity funds. Fixed income remains in favour as investors continue to manage risk. Money market funds continued to attract inflows, which also reflects a more risk-off positioning.

“A key theme in February was a return by some investors to US equity exposure following a sustained period of outflow. Investors have been cautious, the impact of AI on business models across the technology and knowledge-intensive sectors, which are a significant weighting on US indices, remains a factor but the US stock market performed well through 2025 and this has helped a return to inflow.

“Closer to home, the UK saw a moderation in outflows and renewed inflows into tracker funds, supported by demand for diversification and helped by strong performance through 2025.

“Looking ahead, investors will be watching geopolitical developments, including the evolving situation in the Middle East and its potential implications for energy prices and inflation. However, investing remains a long-term proposition, and it is important that short-term volatility does not drive knee-jerk decisions. As we approach the 5 April tax year-end, the coming months will provide further insight into whether investor confidence continues to hold despite ongoing uncertainty.”