British investors pulled out of the stock market at a record pace last year, as Budget uncertainty sparked a flight to safe haven assets.
Equity fund outflows hit £6.7bn in 2025, twice the rate suffered in 2016, the year of the Brexit referendum, where outflows reached £3.3bn, according to global funds network Calastone.
December marked the seventh consecutive month of outflows, with investors withdrawing net £188m, bringing the total since June 2025 to £10.6bn and marking the longest selling spree on record.
Actively managed funds bore the brunt of outflows, shedding £18.9bn of capital in 2025, compared to inflows of £12.2bn for passively managed strategies.
Passive global equity funds also proved themselves more popular than active ones for the first time since 2015.
Budget woes
Despite December marking the seventh month of outflows, it was the smallest since June and an improvement on the July to November period where Budget panic hit boiling point as Brits fretted over attacks on pension tax free allowances and cash ISA cuts.
This led to widespread selling and both October and November seeing outflows exceed £3bn.
December’s improvement was notable across the equity fund sector, with North American funds seeing the biggest recovery, with November’s outflows of £812m turning into a £107m inflow.
Despite the FTSE 100 hitting record highs last year, UK equities remained unfavourable among investors, seeing only a net selling shrink from £847m to £541m last month, with UK funds also seeing their tenth consecutive year of withdrawals.
Edward Glyn, head of global markets at Calastone said: “The sudden, dramatic slowdown in outflows between November and December is a clear indicator that months of pre-Budget speculation contributed to the record outflows from equity funds between June and Budget Day.”
Scramble to safe havens
Investors increasingly turned to safe haven assets last year, with money-market funds having a record 2025, attracting a net £5.84bn of new cash.
Fixed income funds also saw inflows rise by 50 per cent to £1.51bn, but this was less than half the decade average, reflecting volatile conditions in the bond market caused by concerns around inflation and fiscal policy.
Glyn said: Record money market inflows point to investors favouring the safety of cash, suggesting they perceive equity valuations to be teetering after a dramatic 2025 bull run.
“Solid inflows to mixed asset funds and fixed income support the notion that risk-off is the name of the game at present.”
Easing of property fund outflows
Property find outflows showed signs of recovery, with the pace of outflows slowing to £745m, down from £1.2bn in 2024.
Investors withdrew £35m from property fund holdings in December, down from £53m in November.
But reduced selling pressure was responsible for the uptick, not increased appetite from buyers, with Glyn noting it reflects “a shift towards stabilisation rather than renewed demand”.
Overall transaction volumes were also lower, down 23 per cent year on year, while the value of orders fell 25 per cent.
An expected cut to interest rates from the Bank of England in 2026 is predicted to give property funds a boost, but “sustained economic growth” is the “real key” to aiding property funds.