Fund flows soared in June, but investors remain cautious

Retail investors were in a buoyant mood early in the summer as new figures show they poured £3.8 billion into investment funds during June, the highest monthly total since August 2021.

The data from The Investment Association (IA) – an industry body representing the UK’s investment managers – showed that retail investors allocated £12.3 billion into funds during the first six months of the year.

June’s positive fund flows marked the eighth consecutive month of net fund inflows.

While the annual totals suggest that investors were willing to invest, there is evidence that resilience and defensiveness were top of mind.

“Investors have shown resilience by staying invested in the markets, shifting their portfolios to lower-risk strategies, with bonds, diversified mixed assets and cash-like assets leading the way,” said Miranda Seath, director of market insight and fund sectors at the IA.

Fixed income strategies saw monthly inflows of £2.3 billion, the highest monthly figure since January 2021 and up 53% from £1.5 billion in May 2026. Within fixed income strategies, funds focused on government bonds saw the largest inflow, at £674 million during June.

Despite a Memorandum of Understanding between the US and Iran alleviating pressure on oil prices and calming inflation expectations for much of the month, investors allocated their money cautiously and equity funds saw net outflows of £1.1 billion. This was, however, an improvement on the £1.5 billion outflows that occurred in May.

Where were fund flows concentrated in the first half of 2026?

Across the first six months of 2026, equity funds saw total outflows of £7 billion – though, again, this marks a slowing of outflows compared to the £14.3 billion that fled the sector in the second half (H2) of 2025.

Fittingly given the volatile year that US stocks have had, net monthly flows to the North America sector fluctuated between inflows and outflows each month during H1, but it was the only IA equity sector to end the period in positive territory, with inflows of £1.7 billion.

Seath attributed this flip-flopping to investor unease and uncertainties relating to artificial intelligence (AI).

The North American Smaller Companies sector saw its first month of inflows this year during June, bringing in a net £181 million.

Half-yearly outflows from UK-focused funds fell to their lowest level since 2021 – with £3.1 billion leaving these funds in H1 2026 compared to £4.8 billion in H2 2025.

This moderation in UK equity outflows follows a strong 2025 for UK stocks, said Seath.

“Investors may be taking advantage of a more defensive market composition in the face of broader uncertainty,” she added. “The UK market has relatively high exposure to ‘halo’ sectors, those with heavy assets and low obsolescence, such as mining and energy, which are often viewed as more resilient during periods of uncertainty and offer a counter trade to investments in AI and tech stocks helping to diversify portfolios.”

Funds focused on Asian equities, though, saw outflows of £1.6 billion during H1. Certain Asian markets are highly exposed to the volatility of certain parts of the AI infrastructure industry.

“Emerging markets chip manufacturers have become key players in the global AI value chain, driving strong performance but also creating potential new concentration risks in markets including South Korea,” said Seath.

Did active or passive funds see the biggest fund flows in the first half of 2026?

Fund flows are a good way to see what investors are backing in the active versus passive debate. The data from H1 2026 shows passive strategies are overwhelmingly more popular.

Tracker funds saw inflows of £9.7 billion in the first half of the year – their strongest half-year since 2024.

Most of this demand came from equity tracker funds, which saw inflows of £6.8 billion.

Actively managed equity funds, by contrast, saw outflows of £13.9 billion during the first half of the year.

In bad news for sustainable investments, responsible investment funds also saw outflows of £2.7 billion across H1, with outflows from SDR-labelled funds shedding £1.9 billion.