Investors pulled a net £3bn from Investment Association (IA) funds in January, amid heightened uncertainty over monetary policy and the incoming Trump administration.
The redemptions reversed the £2.3bn inflow recorded in December and halted two months of positive flows.
Equities was the most sold asset class, with investors pulling £2.9bn.
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Investors instead placed money into the Volatility Managed sector, which recorded the highest net inflows of the month at £282m. Bond funds received £187m, while multi-asset strategies attracted a modest £39m.
North American equities continued their popularity, remaining in inflow with net retail sales of £358m, although this was much reduced on December’s £945m.
Miranda Seath, director, market insight & fund sectors at the IA, said: “The reversal of fund inflows in January to an outflow of £3bn emphasises that investors are exercising caution in a complex and fast moving geo-political and macro-economic environment.
“The threat of the US imposing tariffs has now become reality. We have also seen a new Chinese entrant in the AI race, DeepSeek, and this briefly introduced market volatility in the US. Although valuations have rebounded, investors with an equity growth objective are waiting to see how where growth opportunities may come as the introduction of tariffs and fast changing geo-political events present a complex picture for markets.”
See also: IA: Net retail outflows slow to £1.6bn in 2024
UK equities
Investors continued their flight from UK equities, with the £1.7bn redeemed in January the highest since £1.9bn in May 2024.
Meawhile, gilts funds took in £175m.
Last year, UK equities continued to be unfavoured, with £13.1bn in outflows recorded across 2024. In 2023, investors pulled a net £13.6bn.
“In the UK, all eyes are on the outlook for growth,” added Seath. “The forecast from the Office for Budget Responsibility, due out at the end of March, will tell us more about the Government’s ability to meet its fiscal targets and give an indication of whether further tax rises may be necessary.
“The recent Bank of England base rate cut may be the last for some months as inflation rises. These factors will affect the outlook for UK equity and debt investment, as well as the UK economy.
“A more certain environment would help investors and their advisers make confident decisions on where to invest capital – it is not yet clear when this will come as they navigate what is set to be a year of change.”
This story was written by our sister title, Portfolio Adviser
