Investors turn away from equity funds as UK continues to suffer outflows

Investors cut their exposure to equities last month, turning to bonds and money market funds, as UK-focused funds suffered another wave of withdrawals.

UK investors withdrew £1bn from equity funds in October, up from £858m the prior month, marking the sixteenth month of outflows in the last seventeen, according to the latest fund flow index from Calastone.

It also marked the ninth largest month on record for outflows. Since the start of the year equities have suffered outflows of around £6.8bn.

UK equity funds shed £815m, a sharp uptick from September’s £708m of withdrawals. Since the start of the year outflows have reached £5.3bn.

Buyers step back

But Calastone said the rise in equity fund outflows reflected a sharp fall in buying compared to an increase in selling, as sell orders fell just 0.3 per cent month on month.

Meanwhile, daily trading figures did not indicate a swell of activity in the lead up to this year’s Autumn Budget which had previously been recorded under Healey’s predecessor.

“In a welcome change from recent form, the Budget left little immediate trace,” said Edward Glyn head of global markets at Calastone.

“Moreover, because October’s higher outflow was driven by a lack of buyers, not an increase in selling, it does not suggest a repeat of investors rushing to crystallise gains ahead of a feared capital gains tax increase.”

But amid wider outflows, emerging market equities stood out once more, attracting £131m, as investors continue to seek opportunities away from concentrated Western markets.

Despite a slight decrease from the £133m of inflows last month, the sector is the only one to attract new money across each of the last three months.

The gloom in the domestic market was felt across the Atlantic, as North American outflows accelerated to £164m, a further £40m loss from September.

Global funds lost £229m, while European and Japanese sector-focused funds also reported net selling.

Passive funds slump as money market shine

Passive funds also reported their first negative month since August 2023, losing £44m, indicating that the pullback from equities goes beyond pressure on active managers. Active funds saw outflows of £1.4bn.

In contrast, investors continued to pile into “safe-haven” money market funds, adding £516m, the strongest inflows seen since the Budget-related November 2025 surge.

Glyn credited the enthusiasm to “a continuing appetite to keep capital readily available” amid ongoing geopolitical and market uncertainty.

Investors also added more to bond funds, but inflows slowed to £302m from £655m last month.