Investors remained resilient amid an uncertain investment environment in the first half of 2025, although behaviour was split between those looking to take advantage of volatile markets and others seeking lower risk and diversification.

The Investment Association (IA) revealed that total inflows from retail investors was £2.9bn in H1 2025, up from £1.7bn over the same period in 2024.

The first six months of the year was “a game of two halves”, with Q1 seeing outflows of £1.9bn while Q2 experienced inflows of £4.8bn.

Investors looking to take advantage of market volatility through April and buying the dip boosted sales to North American equities, while those preferring caution and portfolio diversification opted for European equities and funds that are managed to volatility targets.

The IA said that increasing interest in European assets reflected capital moving away from the US, while the £2.6bn inflows in mixed asset funds in H1 highlighted the attraction for some investors to leave allocation decisions to investment managers.

Equity outflows totalled £2.7bn in H1, with £6.3bn pulled from UK equities during the period.

However, UK equity outflows halved to £2.1bn in the second quarter of 2025 compared to £4.2bn in Q1.

North American equities saw inflows of £2.3bn in the first half of the year, while European equities experienced inflows of £514m during the same period.

Fixed income recorded £1.5bn of outflows in H1, driven by nearly £1bn of outflows from sterling corporate bonds, and responsible investment funds saw outflows of £1.2bn in the first half of the year.

“After a rocky start to 2025, we’re starting to see the mood shifting amongst investors,” commented IA director, market insight & fund sectors, Miranda Seath.

“Despite Q1 2025 recording outflows of £1.9bn, June continued the trend of monthly inflows and markets have remained resilient in the face of trade wars and uncertain tariff policy.

“We have seen some risk-on investors 'buying the dip' in the wake of Liberation Day. Others have taken risk off the table, opting for government bonds or diversifying away from the US and global emerging markets, economies that are more exposed to shifting global trade alliances.

“In times of market volatility, investors should carefully consider the right risk reward trade off and long-term goals should stay front of mind.

“Elsewhere, sustained inflows into mixed assets funds uncover an interesting trend as investors come back to ‘investment solutions’ – we had seen persistent outflows from the mixed asset class between 2022 and 2024.

“In the face of heightened uncertainty, investors are now opting for strategies where investment managers calibrate allocations to equities and bonds on their behalf.

“Closer to home, UK equity funds remained in net outflow in June. However, recent government efforts to re-energise domestic capital markets through the Leeds Reforms and Spending Review could signal a change on the horizon with efforts to create more of a culture of retail investment in the UK.

“IA research suggests that a level of home bias continues to exist amongst end investors and attracting more people to investing could be a boost to UK equities in the long-term.

“However, as June data suggests, the current crop of investors is keeping a close eye on the UK economy - the Chancellor’s plans for this year’s Autumn Budget will be significant and investors will wait to see the impact of potential tax rises and if the economic outlook will improve.”

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