Retail investors pull £1.8 billion from equities, but Europe bucks trend
The latest data from the Investment Association shows July was a bad month for equity funds, with outflows doubling compared to the month before, but Europe was a bright spot


UK retail investors pulled £1.8 billion from equity funds in July, almost double the £912 million they withdrew in June, according to figures published in September.
Global funds saw the largest outflows at £819 million, according to the Investment Association, an industry body. UK funds followed closely behind at £718 million.
The main bright spot – and one of only two regions to report inflows – was Europe, which attracted £276 million in new assets. Japanese funds attracted a more modest £17 million.
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North American funds, which have been a favourite with investors until recently, bled £270 million in assets. Some investors are souring on the outlook for US stocks, following a string of controversial policy decisions from US president Donald Trump.
The outflows from global funds could also be related to events in the US, with around 65% of global market indices made up of US stocks.
“The agreement of the EU-US trade deal at the end of [July] means that two of the largest global trading blocs have set a clearer course,” said Miranda Seath, director of market insight at the Investment Association.
“Investors tend to appreciate greater certainty, which could help to open up selective opportunities for those interested in European assets.”
Are investors turning sour on the US?
It is perhaps surprising that investors pulled money from US funds in a month where regional performance was relatively strong. The S&P 500 rose 2.2% in July, following rallies of around 5% or more in both May and June.
However, there are growing concerns about the US economy. This has ramped up in recent days following signs of weakness in the latest labour market report, published on 5 September.
There are also concerns that tariffs will push US inflation higher going forward – a key reason why the US Federal Reserve has been slower than other central banks to reduce interest rates. So far, the bank has not lowered rates at all this year, keeping them within a range of 4.25-4.5%.
There are also concerns about debt sustainability, with the US government currently holding more than $37 trillion in federal debt. If Treasury yields spike like they did in April when Trump announced his Liberation Day tariffs, it will push up government borrowing costs. This is a problem for a country that is so indebted.
US equity markets have delivered standout performance in recent years, but there is growing concern among some investors that valuations have become detached from reality.
The S&P 500 is trading on around 37 times cyclically-adjusted earnings (CAPE) – a level which Deutsche Bank calls extreme. “Ten-year returns from this starting point are usually poor, especially in real terms,” the investment bank said.
Some argue this time could be different. Big tech is the main area where valuations have soared – and sector bulls argue that share prices are justified given how AI is expected to revolutionise the world around us.
However, there are risks. Nvidia’s market cap is now larger than every country’s entire listed stock exchange apart from the US, China, Japan and India, Deutsche Bank notes.
Inflows into European funds
Challenges in the US have been good news for European funds, with some investors reallocating assets to increase diversification. As Seath points out, July’s data is not a one off. European inflows have been consistent for a large part of this year.
Separate data from investment platform Hargreaves Lansdown also paints a positive trend. European funds on the platform have attracted £69 million so far this year in inflows, compared with outflows of 207 million in 2024. Cheaper valuations could be part of the attraction.
“The good news for those considering an investment now is that European stocks trade at a discount to their history and US counterparts,” said Kate Marshall, lead investment analyst at the platform. The discount reflects ongoing concerns about economic growth, but it could narrow if sentiment improves.
Investors have been quick to identify opportunities in certain sectors. European defence has been an area of focus so far this year, as the continent increases defence spending following a clear indication from the US that it wants to be less involved in European security.
Energy security is another key focus, according to Marshall. “Following the 2022 energy crisis, the EU is investing heavily in renewable energy, LNG infrastructure and power grid upgrades, aiming to reduce reliance on Russian gas and accelerate the green transition,” she said.
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Katie has a background in investment writing and is interested in everything to do with personal finance, politics, and investing. She enjoys translating complex topics into easy-to-understand stories to help people make the most of their money.
Katie believes investing shouldn’t be complicated, and that demystifying it can help normal people improve their lives.
Before joining the MoneyWeek team, Katie worked as an investment writer at Invesco, a global asset management firm. She joined the company as a graduate in 2019. While there, she wrote about the global economy, bond markets, alternative investments and UK equities.
Katie loves writing and studied English at the University of Cambridge. Outside of work, she enjoys going to the theatre, reading novels, travelling and trying new restaurants with friends.
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