There was a shift in investor sentiment in May, as investors shunned the US in favour of globally diversified funds, new data from the Investment Association has revealed.
Investors placed a total of £2 billion into funds in May, up from £1.1 billion in April.
However, uncertainty over the impact of US policy and tariffs on the outlook for returns triggered the first outflows from North American equities in six months.
Investors withdrew £622 million from North American equities, including a record £303 million from funds investing in smaller US companies, reversing April’s £962 million inflows.
The global emerging market sector also saw a record monthly outflow of £525 million, as investors reduce exposure to regions that may be adversely affected by the impact of tariffs.
In sharp contrast, globally diversified equity funds saw strong momentum in May, attracting £558 million of inflows, the highest across all equity regions. European equities benefitted from the trend, with inflows rising to £435 million. While UK equities remained in outflow, the £348 million recorded in May marked the lowest outflow since August 2021.
Meanwhile, fixed income fund sales rebounded with £1.1 billion inflows, led by gilt funds which saw £453 million inflows.
Miranda Seath, director, market insight and fund sectors at the Investment Association, said: “May marked a clear inflection point in investor sentiment and portfolio positioning, as capital shifted away from US and emerging market equities in response to intensifying global trade uncertainty and increased geopolitical risk.
“This shift in sentiment also benefitted sales to European equity funds, where European stocks have performed well in 2025 and has helped to stem outflows from UK equity funds.”
Seath said investors will now be watching the Autumn Budget to see if the Chancellor can manage the deficit without further tax rises.
“The road ahead, however, remains bumpy and not just in the UK. With the July 9th US tariff deadline approaching and longer term, a clear shift in the trajectory of global trading partnerships as well as an escalation in global conflicts, market volatility looks set to continue.”
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