Key facts
- Investors withdrew £601m from UK equity funds in August.
- This is the 14th month of equity outflows in the past 15.
- Speculation about potential tax hikes in the upcoming Budget is driving caution.
- Fixed-income and money market funds experienced strong inflows.
- Money market funds saw their strongest inflows since November, taking in £364m.
- Bond funds attracted £407m in net new capital.
UK equity funds experienced another month of significant outflows in August, with investors pulling a net £601m. This trend contributed to broader global equity outflows, marking the fourth consecutive month of net selling internationally and the 14th month of equity outflows over the past 15, according to Calastone's latest Fund Flow Index. Since June 2025, investors have withdrawn a total of £15.16bn from equity funds.
Edward Glyn, head of global markets at Calastone, stated that selling in the UK market has been exacerbated by caution surrounding potential tax increases in the upcoming October Budget. He noted that if investors anticipate capital gains and pension tax breaks being targeted, they may choose to act now to avoid future risks.
Chancellor John Healey's recent speech on Monday did little to quell Budget speculation, as he repeatedly declined to rule out tax hikes. Healey is also facing increased pressure due to a global bond rout that has driven up borrowing costs. Some economists predict that the existing fiscal headroom of £23.6bn could be halved due to rising gilt yields.
Instead of exiting financial markets entirely, capital is being redirected towards fixed income, money markets, and real assets, which offer more stable income and downside protection. Money market funds, which invest in short-term, high-quality debt, saw their strongest monthly inflow since November, with a net £364m. Bond funds also attracted substantial capital, securing £407m in net new inflows for the fourth consecutive month. Combined, cash and fixed-income strategies have absorbed £8.7bn since equity outflows began last summer.