Investors pull £1.8bn from funds in August as caution widens

Retail investors pulled nearly £2bn from equity funds in August, IA data shows, while government bond funds saw record redemptions. Hargreaves Lansdown’s Kate Marshall said the figures highlight shifting sentiment, as index trackers posted their first outflow since October 2023.

Kate Marshall, lead investment analyst, Hargreaves Lansdown:

“UK retail investors significantly dialled back their exposure to funds in August, pulling a net £1.8 billion, according to the latest Investment Association data. This marks a substantial increase from July’s £277 million outflow and reflects growing caution as economic and geopolitical uncertainties deepen.

Equity funds remained the focus, with almost £2 billion withdrawn across global regions. UK equities saw £841 million in redemptions, while Japanese equities experienced their largest outflow since May 2022, at £272 million. Even European equity funds, which had been a relative haven, recorded outflows for the first time since February.

Index tracking funds saw their first monthly outflows in nearly two years, driven by £1.1 billion withdrawn from fixed income trackers. This led to a record net £387 million outflow from index trackers overall, perhaps signifying a reassessment of passive strategies amid market volatility.

Government bond funds experienced unprecedented redemptions of £601 million. This appears linked to concerns around the sustainability of UK, US, and French government debt as fiscal deficits persist, pushing up yields on long-dated bonds. Worries over longer-term government debt may be prompting investors to reconsider fixed income allocations.

Despite this, fixed income funds overall remained modestly positive, with inflows concentrated in Strategic Bond, Specialist Bond, and Global Emerging Markets Local Currency funds. Mixed asset funds also continued to attract capital, drawing £180 million in inflows, with the 40-85% Shares sector again the most popular choice.

Money market funds, which had seen steady inflows since early 2025, saw a pause in August with £119 million withdrawn.

Looking ahead, investors appear to be adopting a ‘wait and see’ stance, driven by a combination of inflationary pressures, uncertainty around future rate cuts, uncertainty over the upcoming UK Budget, and ongoing geopolitical risks.

HL data shows that the US and global sectors continued to dominate the list of most bought funds, though a European fund also makes an appearance following a good year for European equities so far. The balance remains tilted towards passive funds overall.

The most bought investment trusts are more diverse, with no presence of global or US equity trusts once again. Income remains a popular theme, with investors taking advantage of attractive yields during an uncertain period for markets. Several renewable energy trusts also remain on the list – these trusts continue to sit on significant discounts, enhancing their appeal to investors.”

HL data