The Most Popular Fund Sectors of 2025 as Investor Outflows Continue

Why It Matters

The flow patterns signal a broader risk‑off sentiment among UK DIY investors, reshaping fund managers’ product strategies and influencing capital allocation across the asset management industry.

Key Takeaways

• Equity funds lost £16.8bn, driven by US tech worries
• Money‑market funds attracted £6.9bn, becoming top‑selling sector
• Retail net outflows stayed at £2.3bn, matching 2024
• Passive tracker inflows dropped to £12.8bn from £27.6bn
• Analysts predict continued demand for low‑risk diversified funds

Pulse Analysis

The persistent outflows from UK retail funds in 2025 underscore a cautious investor mindset shaped by geopolitical tension, tariff uncertainty, and lingering concerns over high‑valuation US tech stocks. While the net £2.3 billion withdrawal mirrors the previous year, the composition of those exits reveals a strategic rotation away from pure equity exposure toward assets that can weather volatility. This risk‑off tilt is not unique to the UK; similar patterns have emerged across Europe, where investors are increasingly scrutinising macro‑policy signals before committing capital.

Money‑market and mixed‑asset vehicles surged ahead, collectively pulling in over £11 billion, a clear endorsement of liquidity and capital preservation. Short‑term money‑market funds, in particular, attracted £6.1 billion, reflecting a desire for cash‑like returns amid an uncertain policy backdrop. Asset managers are responding by expanding low‑duration offerings and emphasizing defensive positioning within multi‑asset portfolios. The shift also pressures traditional equity‑focused product lines to innovate, integrating hedging mechanisms or hybrid structures to retain investor interest.

Looking into 2026, analysts anticipate that the defensive bias will persist, especially as monetary policy diverges between the UK and the US and the Leeds Reforms aim to broaden retail participation. Passive trackers, while still popular, saw inflows halve from 2024 levels, suggesting investors are weighing cost against performance in a subdued market. Meanwhile, active managers may find opportunities in niche sectors where they can add value beyond index replication. The overall landscape points to a gradual rebalancing toward diversified, lower‑risk allocations, setting the stage for a more resilient retail fund ecosystem.

The most popular fund sectors of 2025 as investor outflows continue

The most popular fund sectors of 2025 as investor outflows continue · By Marc Shoffman · Published 5 February 2026

Investors remained cautious about putting money into financial markets in 2025, with industry data showing another year of outflows but the rate of withdrawals is dropping.

Last year was a volatile period for those looking to invest, with worries about Trump tariffs, geopolitical tensions, fears of a technology bubble in the US and the Autumn Budget in the UK.

Investment Association (IA) data shows net retail outflows from funds totalled £2.3 billion in 2025, matching 2024, following a £2.0 billion boost to inflows in December to close the year.

It marks a decade of outflows for UK equity funds, while money‑market funds were the most popular among DIY investors and saw record inflows.

“2025 saw a small outflow from UK retail funds. Through extended periods of geopolitical and market uncertainty, investors were cautious. In 2025, investors rotated away from US and global equity strategies and into diversified, lower‑risk asset classes, such as money market, mixed‑asset and mixed‑bond funds.”

— Miranda Seath, director of market insight and fund sectors, IA

Equity funds

• Investors took £16.8 billion out of equity funds in 2025.

• The outflows were driven by caution over high exposure to large‑cap US tech stocks amid speculation of an artificial‑intelligence (AI) bubble.

• North American equities saw £2 billion of redemptions in the second half of the year, while global equity funds, many with significant exposure to the largest US tech companies, saw ‑£4.8 billion flow out across the year.

• European equity funds benefited modestly, reaching inflows of £761 million.

• UK equity outflows were £11.1 billion, the best performance since 2021.

“Strong performance from the UK stock market in 2025 doesn’t seem to have stemmed the tide. £11.1 billion of outflows speaks for itself, and suggests the rally in domestic stocks was heavily influenced by overseas buyers, rather than demand from UK fund investors.”

— Laith Khalaf, head of investment analysis, AJ Bell

Money‑market funds

• Money‑market and mixed‑asset funds emerged as the year’s bestselling asset classes, attracting inflows of £6.9 billion and £4.5 billion respectively.

• Short‑term money‑market funds were the best‑selling sector in 2025 with inflows of £6.1 billion.

“As investors waited to see how markets would move following the introduction of tariffs, money‑market funds were a useful short‑term, liquid option for many investors managing their allocation strategies. However, through 2025 we have seen inflows for 10 of the 12 months of the year as sustained uncertainty has driven increasing use of defensive positions.” – IA

Fixed‑income funds

• Fixed‑income funds attracted £1.1 billion of inflows over the year, down from £3.6 billion in 2024.

• Mixed‑bond funds were the most popular within the category, with £1.2 billion in net inflows over the second half of the year.

Active versus passive funds

• Tracker (passive) funds attracted £12.8 billion of inflows in 2025, down from a record £27.6 billion in 2024.

• Actively managed funds saw outflows ease to £15.1 billion, compared with £29.9 billion in 2024.

“Passive funds are simpler, cheaper, and have been performing better. Over the past ten years just 24 % of active managers have beaten a passive alternative. Index trackers also appeal to those who invest money on behalf of others… Investing in passive funds therefore removes some significant career risk, and at a lower pricing point to boot.” – Laith Khalaf

Where to invest in 2026

Seath is confident that retail fund flows will continue to bounce back in 2026.

“Demand for diversified, lower‑risk allocations looks set to continue in a climate of persisting geopolitical uncertainty, evolving monetary policy in the UK and the US and ongoing concerns around high US equity valuations. At the same time, investing is a long‑term game. The Leeds Reforms provide a once‑in‑a‑generation framework to bring more UK adults into investing: the stage is set to drive an increase in retail investment across the UK.” – Miranda Seath

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Marc Shoffman – Contributing editor

Marc Shoffman is an award‑winning freelance journalist specialising in business, personal finance and property. His work has appeared in print and online publications ranging from FT Business to The Times, Mail on Sunday and the i newspaper. He also co‑presents the In For A Penny financial‑planning podcast.