January represented an 'unprecedented' eighth consecutive month of outflows, according to Calastone. Credit: iStock
Investors pulled money out of UK and European equities funds in January, as tensions over Greenland rose, according to Calastone data.
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Outflows across equities as whole totalled a net £697m during the month, according to Calastone's Fund Flow index. January represented an "unprecedented" eighth consecutive month of outflows, the firm said.
The outflows were attributed to the Greenland tensions for two reasons; timing and location.
After a quiet first half to the month, which saw outflows and inflows roughly in balance, the prospect of a major rupture in relations with the US saw outflows from equity funds accelerate sharply on 19 January and for the rest of the month.
The fund sectors that bore the brunt of the selling were European and UK equities funds.
European equities strategies had their worst month since January 2025, as investors pulled £237m. UK-focused funds had been on track for the smallest outflows since May 2025, but from 19 January outflows accelerated to £694m by month-end.
In contrast, outflows from Asia-focused funds continued but remained in line with the monthly average. Redemptions from Japanese equities funds were lower in January than in recent months and were smaller in the second half of the month. Emerging markets, global and North American funds all saw inflows.
On the fixed income side, £459m of inflows were logged in January. This was in line with the average of the last six months. Inflows were mainly in the corporate bond sector, with sovereign bond funds seeing outflows.
Inflows to mixed asset funds of more than £1bn remained in line with their ten-year monthly average, while money market funds saw their first outflow since April 2024. January is typically a "weak month" for cash funds due largely to Christmas-related spending, Calastone noted.
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Edward Glyn, head of global markets at Calastone, said: "The pace of outflows in January was far slower than in the run up to the Budget, where a record flood of selling was prompted by concerns of possible higher pension and investor taxes.
"This indicates that the risk of conflict over Greenland was more of a tail risk in investors' minds rather than a clear and present danger," he continued. "It shows, however, that it does not take much to fracture fragile sentiment, especially when stock prices are riding this high.
"Investors now have to be more alive to geopolitical factors than in the past and they are titrating their geographical allocations accordingly."
Money market funds dominate 2025
The UK funds industry saw retail outflows totalling £2.3bn in 2025, matching 2024, according to the latest flows data from the Investment Association. The figures were improved by a £2bn boost to inflows in December.
Money market funds were the bestselling asset class in 2025, recording £6.9bn in inflows, representing the highest total on record for the sector.
Total funds under management closed 2025 at £1.62trn, up from from £1.49trn at the end of 2024.
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Miranda Seath, director, market insight and fund sectors at the IA, said: "2025 saw a small outflow from UK retail funds. Through extended periods of geopolitical and market uncertainty, investors were cautious.
"In 2025, investors rotated away from US and global equity strategies and into diversified, lower risk asset classes, such as money market, mixed asset and mixed bond funds," she continued.
Seath forecast 2026 will see retail fund flows to "continue to build back" as "demand for diversified, lower risk allocations looks set to continue in a climate of persisting geopolitical uncertainty, evolving monetary policy in the UK and the US and ongoing concerns around high US equity valuations".
