FTSE 100’s flying, but fund investors aren’t buying

Fund investors haven’t been drawn to the recent strong performance of the UK stock market, with the latest fund figures showing that nearly £1 billion was withdrawn from UK equity funds in June.

Figures from the Investment Association (IA) show that overall for the month of June £438 million of new money was invested in funds. This brings total inflows for the first half of 2025 to £2.9 billion.

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The IA described fund sales so far in 2025 as a “game of two halves”, with £1.9 billion withdrawn from funds in the first quarter and £4.8 billion of inflows in the second quarter.

The figures for June show that UK funds were the worst-selling equity funds by region, with outflows totalling £964 million. This is the worst figure recorded in three months and an acceleration of outflows since £356 million in May.

Investors are giving their home market the cold shoulder at a time when UK markets – particularly the FTSE 100 index – is buoyant. In mid-July, the flagship UK blue-chip stock market index crossed 9,000 points for the first time in its history.  

The FTSE 100 bottomed out at 7,679 on the 9 April following “Liberation Day” tariff announcements from Donald Trump that shocked global stock and bond markets. Sentiment reversed when he announced a 90-day pause on tariffs. Since 9 April, the FTSE 100 is up 18.8%, close to the 20% bull-market territory level.

As we’ve previously explained, stock market highs shouldn’t be feared, and there are some compelling reasons why UK outperformance could continue.

• Three reasons UK outperformance can continue
• Should you invest when markets are at all-time highs?

Among customers of interactive investor, UK funds are not exactly flavour of the month. In our ii Top 50 Fund Index, which each quarter ranks the most-bought funds, investment trusts and ETFs, only three UK equity funds feature: City of London (LSE:CTY), iShares Core FTSE 100 ETF (LSE:ISF) and Vanguard FTSE 100 ETF (LSE:VUKE). The latest edition covers the period to 30 June 2025.

Topping the IA sales table for regional equity funds is Europe, which posted inflows of £198 million. Europe as an investment destination has been unloved for many years among UK retail investors, with the conflict in Ukraine affecting sentiment. A lack of world-leading technology shares could also deter investors.

While European markets are home to sectors that some may find less exciting, such as finance, industrials and healthcare, this hasn’t led to dull returns. Over three and five years, the average European fund has returned 35.9% and 55.9%.  

Second in the regional equity fund rankings is Japan, with inflows of £127 million, while in third, US funds attracted £52 million.

Meanwhile, Asia and global funds posted outflows of £216 million and £148 million respectively.

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Overall, the five bestselling sectors in June were Short Term Money Market (inflows of £683 million); Mixed Investment 40-85% Shares (inflows of £377 million); Europe Excluding UK (inflows of £218 million); North America (inflows of £192 million) and Global Equity Income (£163 million).

While global funds posted outflows in June, at interactive investor, customers continue to follow a global approach when it comes to core holdings. While the uptick in stock market volatility earlier this year will have been unnerving for some, global markets have been in recovery mode over the past couple of months. It serves as a reminder that time and patience are key traits in investing.

In particular, owning the market via a global index fund is a very popular strategy, with Vanguard LifeStrategy 80% Equity, HSBC FTSE All-World Index, Vanguard LifeStrategy 100% Equity, Vanguard FTSE Global All Cap Index and Fidelity Index World all featuring prominently in our ii Top 50 Fund Index.

Among investment trusts, four global approaches feature: Scottish Mortgage (LSE:SMT), JPMorgan Global Growth & Income  (LSE:JGGI), Alliance Witan (LSE:ALW) and F&C Investment Trust (LSE:FCIT). While for global funds, Fundsmith Equity, Artemis Global Income and Ranmore Global Equity have a place in the Top 50.