Net retail outflows for 2024 totalled £1.6bn, showing the withdrawals from funds dramatically slowing since 2023, when there were £24.3bn in outflows, according to the Investment Association (IA).
Despite slightly negative retail flows, funds under management continued to grow throughout the year, increasing 6% to £1.5trn. Across the year, seven months ended in positive net flows, but were tampered by outflows in September and October in the leadup to the budget. The buoyant figures show a “cautious return to optimism” by investors, helped by rate cuts and a strong performance by US equities, the IA said.
Index tracking funds attracted record flows in 2024, bringing in £28bn. The sector now accounts for a quarter of funds under management, increasing from 18% just five years ago.
Global and North American index trackers drew the most attention, with inflows of £10.2bn and £3.8bn, respectively.
Miranda Seath, director of market insight and fund sectors at the IA, said: “At the end of 2024, flows to US equities were bolstered by the strong response of the US market to Trump’s US election victory. Investors viewed a Trump presidency as broadly positive news for the performance of US companies and the large US listed technology stocks.
“This has driven sales to the IA’s North America and North America Smaller Companies sectors. Outflows from UK equity sectors also eased in November and December – the question is whether we’ll reach the tipping point back into inflows in 2025.”
In 2024 overall, the UK continued to be out of favour, with £783m in net retail outflows for equity funds, and UK All Companies suffering £553m in outflows. Asia was a distant second for largest outflows, with losses of £197m.
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“While returns may be choppier across equity markets around the world, it could bring some interesting opportunities for investment managers to drive performance. With such distinct short and long-term structural changes witnessed across global markets in recent months, what will remain true in 2025 is that markets won’t stand still,” Seath said.
“The key message therefore to investors is to stay invested through periods of volatility and to think long-term. The UK investment management sector is critical to support this, by empowering investors to access capital markets and improve their financial futures.”
The rocky environment of 2024 proved helpful for bonds, which saw inflows of £3.2bn in the year, while equities lost £5.7bn. While faith has started to return to the equity market, Seath said that the next year will likely not be all smooth sailing.
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“While there may be significant opportunities for investors in 2025, the febrile global geo-political environment could introduce more volatility. For example, after the initial announcement of US tariffs for Mexican, Canadian and Chinese goods, it’s still uncertain when and how high Trump will set final tariffs,” Seat said.
“Tariffs would be detrimental for both global trade and may introduce investor caution over sectors, such as emerging market equities. It is also unclear what impact tariffs will have on the US economy. The S&P 500 fell by 1.5% on the first trading day following the recent tariff announcement. The dollar has strengthened, and tariffs are likely to push up the price of goods and components from outside the US, which will have some impact on consumer prices and manufacturing, and therefore on inflation. With a more uncertain outlook, the Federal Reserve could pause the rate cutting cycle.”
This story was written by our sister title, Portfolio Adviser
