June saw a surge in fund flows, but investors are still wary

Despite investor hesitancy, North American funds ended the first half of the year with positive flows

Early in the summer, retail investors were feeling optimistic because, according to recent data, they invested £3.8 billion in investment funds in June, the most since August 2021.

According to data from The Investment Association (IA), an industry association that represents investment managers in the UK, retail investors invested £12.3 billion in funds in the first half of the year.

The eighth consecutive month of net fund inflows was June's positive fund flows.

There is evidence that resilience and defensiveness were the top priorities, even tho the yearly totals indicate that investors were willing to invest.

Watch the entire video here. Miranda Seath, director of market insight and fund sectors at the IA, stated, "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."

Monthly inflows into fixed income strategies totaled £2.3 billion, the highest amount since January 2021 and a 53 percent increase from £1.5 billion in May 2026. Government bond funds received the biggest inflow among fixed income strategies, totaling 674 million in June.

Investors distributed their funds cautiously, and equity funds saw net outflows of £1.1 billion, even tho a Memorandum of Understanding between the US and Iran eased pressure on oil prices and calmed inflation expectations for much of the month. Nonetheless, compared to the 1.5 billion outflows in May, this was an improvement.

In the first half of 2026, where were the majority of fund flows concentrated?

Equity funds saw a total outflow of 7 billion during the first half of 2026; however, this represents a slowdown from the 14.3 billion that left the industry in the second half (H2) of 2025.

Net monthly flows to the North America sector fluctuated between inflows and outflows each month during H1, which makes sense given the turbulent year that US stocks have had. However, with inflows of 1.7 billion, it was the only IA equity sector to end the period in positive territory.

Seath blamed investor anxiety and doubts about artificial intelligence (AI) for this reversal.

June was the first month of inflows for the North American Smaller Companies sector this year, 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.

According to Seath, this slowdown in UK equity outflows comes after a robust 2025 for UK stocks.

"A more defensive market composition in the face of broader uncertainty may be exploited by investors," she continued. "The UK market has a comparatively high exposure to 'halo' sectors, such as mining and energy, which are thot to be more resilient during uncertain times and provide a counter trade to investments in AI and tech stocks that aid in portfolio diversification. These sectors have heavy assets and low obsolescence."

However, 1.6 billion was taken out of Asian equity-focused funds in H1. Certain Asian markets are particularly vulnerable to the volatility of specific segments of the AI infrastructure sector.

"Key players in the global AI value chain, emerging market chip manufacturers are driving strong performance but also creating potential new concentration risks in markets like South Korea," stated Seath.

In the first half of 2026, did the largest fund flows go to active or passive funds?

When it comes to the active versus passive debate, fund flows are a useful indicator of what investors support. Passive strategies are far more common, according to H1 2026 data.

Inflows into tracker funds totaled 9.7 billion in the first half of the year, the highest amount since 2024.

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

In contrast, 13.9 billion was taken out of actively managed equity funds in the first half of the year.

The bad news for sustainable investments is that responsible investment funds also experienced outflows of 2.7 billion during the first half of the year, with SDR-labeled funds losing 1.9 billion.