Investors started 2025 in a more pessimistic mood after enthusiastically adding to equity, bond and mixed asset funds in the last two months of 2024, according to the latest Fund Flow Index from Calastone, the largest global funds network. They withdrew a net £640m from equity funds in January, the only month since late 2023 to see outflows – except for October 2024 when net selling was driven entirely by the need to crystallise profits ahead the anticipated capital gains tax hike in October’s budget.


UK-focused funds shed £1.07bn, the sixth worst month on record, despite record UK share prices
Investors were very choosy in January, however, UK-focused equity funds were again hardest hit, with £1.07bn of outflows marking the sixth worst month on record for the unloved UK equity market. Net selling of £265m from European equities meant January numbered in the top 20 worst months for that fund sector too. Meanwhile funds investing in Asia-Pacific, China and Japan also saw outflows.
North American equities garnered net inflows of £576m
The big winners were North American equities. £576m flowed into the sector as the stock market rose strongly following a wobbly December. Global equity funds also enjoyed a strong month in January.
Edward Glyn, head of global markets at Calastone said: “UK fund investors seem to have given the government’s fretful growth narrative a clear thumbs down. The UK stock market reached all-time highs in January, but investors merely took this as an opportunity to get out while the going was good. Meanwhile, political instability and increasing anxiety about the economy have put Europe back on the sell list after a strong 2024 for inflows driven by rising share prices.
“Apparently nothing can dent the enthusiasm for US stocks, however. Even the DeepSeek AI shock that happened late in the month spurred appetite rather than fear. The day after technology companies saw $1trillion wiped off their market value, North American equity funds had their best day of the month with £167m of net inflows.”
Among other asset classes, fixed income funds saw inflows fall by two thirds month-on-month to £267m, their weakest showing since September when investors were taking profits at the end of a long bond-market rally. All fixed-income sectors had a worse month but sovereign-bond funds saw the biggest drop-off in interest – inflows fell by almost nine-tenths to £41m. Net buying of corporate bond and high yield bond funds held up better. Inflows to mixed asset funds dropped to £960m.
Edward Glyn added: “Bond markets had a terrible start to 2025 with yields on benchmark US Treasuries and on UK gilts surging to their highest level since before the Global Financial Crisis (bond prices fall when yields rise). Investors bought into this market decline in the first half of the month – enabling new capital to lock into these ultra-high yields, before turning net sellers as calm returned. This is a pattern we often see in the millions of trades Calastone processes every month. Bond yields remain high, with the outbreak of an inflationary trade war potentially keeping them at elevated levels.”
