Index tracking funds saw their biggest ever monthly outflows (£387m) in August 2025, following a 22-month inflow streak.
This is according to Investment Association (IA) data, which also shows outflows of £1.1bn from fixed income trackers which helped to drive the first outflows experienced for trackers since October 2023 as a whole.
Also, UK retail investors withdrew a net £1.8bn from funds in August, a substantial jump from July’s £277m.
Equity funds dominated outflows with £2bn withdrawn.
August recorded the highest equity outflows since January, with equity funds accounting for the majority of redemptions.
Both Japanese and European equity funds also experienced £272m and £15m in redemptions.
The negative investor sentiment towards equities seen in July extended in August across all regions, driven by a combination of “inflationary pressures and weakening expectations of interest rate cuts impacting risk appetites and investment strategies”.
The IA said: “UK investors are increasingly cautious amid continued uncertainty surrounding the longer-term impact of global trade tariffs.”
Additionally, further caution has grown due to speculation around potential UK tax increases due in November’s budget, a pattern observed last year when investors pulled £9.4bn from funds in the two months leading up to the 2024 budget.
Government bond funds also experienced record outflows totalling £601m. This coincided with growing concerns over the sustainability of UK, US and French debt amid large fiscal deficits, in turn pushing up yields on long dated debt.
IA director, market insight & fund sectors Miranda Seath said: “While August is typically a quiet month, and this month especially so – with gross sales of £23.9bn, down 10% when compared to August 2024 – the significant increase of £1.8bn in net outflows does signal clear investor caution.
“The introduction of new tariff policies on 1 August heightened global trade uncertainty, while speculation around fiscal policy and perceptions that equity valuations may be peaking in certain markets further impacted investor activity.
“Equities led outflows, reflecting rising caution and a reassessment of regional risks versus US dollar diversification. The outflows in index tracking and Government bond funds also raises questions over the impact of deficits and inflation on certain asset classes. Instead, investors pivoted towards active and emerging strategies such as Strategic, Specialist and Emerging Market – Local Currency bond funds.
“Looking ahead, sentiment is expected to remain cautious as markets balance stretched equity valuations, higher long-term bond yields and persistent political and fiscal uncertainties. In the UK, speculation over potential pensions reforms in the upcoming Autumn Budget may increase pressure, risking a repeat of the seasonal outflows observed before last year’s fiscal event.”
The IA champions UK investment management and supports British savers, investors and businesses, its 250 members collectively manages £9.1trn of assets.
