Fund investors pull money out of the US, but is it just a blip?

Laith Khalaf
3 July 2025
  • £622 million was withdrawn from US equity funds in May, according to Investment Association data published today
  • This included a record £303 million outflow from US Smaller Companies funds
  • Global Emerging Markets funds saw a record monthly outflow of £525 million
  • Gilt fund flows second highest on record at £453 million
  • UK equity funds have their best month since 2021 with ‘only’ a £348 million outflow

Laith Khalaf, head of investment analysis at AJ Bell, comments:

“Trump’s trade tariffs have turned the investment world upside down, which is a bit of an own goal seeing as the US stock market was sitting pretty at the top of the old world order. Fund investors are now questioning whether their US exposure is a bit toppy, and collectively pulled £622 million from North American funds in May.

“It looks like investors took some time after Liberation day to yank money out of the US, as flows were positive in April, at £962 million. There was probably some dip-buying going on in April which may have masked outflows, and some investors probably waited for a bit of a rebound in US equity markets to encash their holdings after the madcap shock of the Liberation day tariffs.

“I wouldn’t call the end of fund investors’ love affair with the US just yet, as this might be a blip in an otherwise relentless trend. Flows into US equity funds are still robustly positive this year, and the bounce back in the S&P 500 since April will likely serve to settle some nerves. Even in May £558 million flowed into global funds, and most of that money is going to be allocated to the US.

“That’s not to say the US market is peachy, because there seems to be a disconnect between the market and reality. The S&P 500 is hitting record highs while the policies enacted by the US President are casting a shadow over the US economy. Perhaps the tax cuts lodged in the big beautiful bill will offset the cost of tariffs and stimulate growth. Then again, maybe not. There is at the very least a high degree of uncertainty over the direction of the US economy, and while valuations sit at such heights, that opens up the possibility of disappointing performance.

“Unfortunately the uncertainty doesn’t just affect the US; so far-reaching are the effects of Trump’s trade policy. Investors took money off the table in Global Emerging Markets as they sought to dial down risk and avoid countries on Trump’s tariff radar, notably China. UK equity funds also saw a £348 million outflow in June, which sounds bad, but was actually an exceptionally good month in the context of recent activity. This was in fact the best monthly reading for UK equity fund flows since summer 2021. It’s not been unusual for monthly outflows to total more than £1 billion for a long time now.

“Investors are also buying into gilt funds, and well they might, given the attractive yields on offer and the relatively low chance of default. That doesn’t mean there won’t be sell-offs, indeed we’ve just witnessed one based on the Chancellor’s position looking more precarious, with the market worrying about the integrity of the fiscal rules. Gilt funds don’t come with the same tax advantages as buying low coupon gilts individually, which has been another popular strategy with investors looking to hold safer assets, earn a decent return, and minimise tax. However if you hold a gilt fund in a SIPP or ISA there’s no tax to pay, so the disadvantage versus buying individual gilts disappears.”

Laith Khalaf
Head of Investment Analysis

Laith Khalaf started his career in 2001, after studying philosophy at Cambridge University. He’s worked in a variety of roles across pensions and investments, covering both the DIY and the advised sides of the business. In 2007, he began to focus on research and analysis, and has since become a leading industry commentator, as well as a regular contributor to the financial pages of the national press. He’s a frequent guest on TV and radio, and for several years provided daily business bulletins on LBC.

Contact details

Mobile: 07936 963 267
Email: laith.khalaf@ajbell.co.uk

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