UK Investors Withdraw £1.31bn from Equity Funds Amid Record-High Stock Markets

Investors withdrew £1.31bn from UK equity funds in August, despite record-high stock markets. The outflow was driven by concerns over the UK's economic performance and the ongoing Brexit uncertainty. Despite this, investors remained positive on international equity funds, with inflows of £1.16bn.

Title: Investor Sentiment and Fund Flows in August 2025

August 2025 saw a notable shift in investor sentiment, with significant withdrawals from UK equity funds despite record-high stock markets. The outflow of £1.31bn was driven by concerns over the UK's economic performance and ongoing Brexit uncertainty. However, investors remained positive on international equity funds, with inflows of £1.16bn.

The economic backdrop was marked by strong financial results from major companies and a decrease in UK interest rates to their lowest level in over two years. However, the Bank of England's base rate reduction from 4.25% to 4.0% in early August did not deter investors from withdrawing from UK equity funds [1].

Cash funds remained popular, with the Fidelity Cash Fund and the Royal London Short Term Money Market Fund topping the charts for ISA and SIPP investors. These funds, which aim to track UK interest rates, have seen their returns rise significantly since 2021. Despite the potential for lower returns as interest rates come down, their stability and low-risk profile continue to attract investors [1].

In contrast, international equity funds experienced inflows, with investors showing confidence in global markets. The Fidelity Index World Fund, which invests in over 1,300 companies, saw significant inflows. This fund, along with the Legal & General Global Technology Index Trust and the Artemis SmartGARP European Equity Fund, were among the best-selling funds in August [1].

The UK's economic performance and the ongoing Brexit uncertainty contributed to the negative sentiment towards UK equity funds. Speculation about the UK's budget, set for November 26, has added to the risk perception. Finance minister Rachel Reeves is expected to announce tax increases, potentially impacting business confidence [2].

Despite the uncertainty, investors have shown resilience in their international equity investments. The Legal & General Global Technology Index Trust, which tracks the FTSE World-Technology Index, has been a favorite among ISA investors. The fund's top holdings include Nvidia, Microsoft, Apple, and Meta, reflecting investors' optimism in the technology sector [1].

In summary, August 2025 saw a mixed picture of investor sentiment. While UK equity funds faced significant withdrawals due to economic concerns, international equity funds experienced strong inflows, indicating investors' confidence in global markets. The UK's economic outlook and the upcoming budget will continue to shape investor sentiment in the coming months.

References:

[1] https://www.fidelity.co.uk/markets-insights/investing-ideas/funds/top-10-best-selling-isa-and-sipp-funds-in-august/
[2] https://www.reuters.com/world/uk/uk-budget-speculation-adds-risks-economy-2025-09-03/