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The UK stock market’s strongest showing for 16 years failed to stem sharp outflows from mutual funds focused on domestic equities last year.

Retail investors pulled a net £11.1bn from UK equity funds in 2025 — the tenth straight year of outflows — as they ballooned to £71bn over the past decade, according to data from the Investment Association, the trade body.

This was despite the FTSE 100 surging by 21.5 per cent last year, its biggest gain since 2009, as it hit a series of record highs along the way and outperformed even Wall Street’s all-powerful S&P 500.

The wave of selling in 2025 was only marginally lower than in 2023 and 2024, when outflows were £13.6bn and £12.7bn respectively as the UK’s flagship index eked out modest gains.

Funds also suffered outflows despite efforts by chancellor Rachel Reeves to drum up interest in the UK’s equity market as she heralded what she claimed were “the first signs of a new golden age for the City”.

“UK equity funds have had a dismal decade,” said Laith Khalaf, head of investment analysis at fund platform AJ Bell.

“Part of this can be explained by the shiny lights in Silicon Valley attracting money to the other side of the Atlantic. Part can be explained by the fact that DIY investors feel more comfortable investing in individual stocks in their domestic market, so they have less call for a fund manager to do this for them.”

Jason Hollands, managing director of wealth manager Evelyn Partners, said speculation over tax changes in the two months up to November’s Budget also prompted investors to sell UK stocks.

The continued outflows were part of a broader exit from stock markets last year, with £16.8bn pulled from equity funds in general, higher than in 2024, with even previously popular sectors such as US equities seeing outflows in the second half of 2025, amid geopolitical uncertainty and concerns over the valuations of artificial intelligence-related companies.

Khalaf feared the exodus from UK equity funds was structural, however, and likely to continue for much longer.

“A big part of the story lies in the shift towards passive investment strategies and the global benchmarking of portfolios. The UK stock market makes up just under 4 per cent of the MSCI World Index, and yet the UK All Companies fund sector is the second most popular after the Global sector, with £148bn of assets,” he said.

“This means that despite a decade of outflows, UK fund investors are still heavily overweight UK stocks compared with global benchmarks. The unwinding of this overweight position may therefore yet have a long way to run.”

Overall, the IA data points to UK investors battening down the hatches last year, with ultra-defensive money market funds enjoying record net inflows of £6.9bn, even as equities were out of favour.

“Although markets were exceptionally strong last year across most asset classes, for UK retail investors we had high levels of interest rates, so investments were competing with cash, and cost of living pressures,” said Hollands. Money market funds are one of the few asset classes that benefit from elevated interest rates.

Some broader trends are at play, however. The switch from actively managed funds, which attempt to beat the market, to passive ones, which just track it, continued apace last year, with £15.1bn being withdrawn from active funds and £12.8bn going to passive ones.

“Over the last four calendar years £120.9bn has been withdrawn from active funds,” said Khalaf. “Things are still abysmal out there for active fund managers.”

The trend towards passive investing has helped fuel a shift in the UK and elsewhere from mutual funds to cheaper, more transparent exchange traded funds, most of which are passive.

Although it is not possible to break down flows by country, ETFs saw record net inflows last year of $397bn in Europe including the UK, pushing assets to a record $3.2tn, according to ETFGI, a consultancy.

“ETFs have grown in popularity. It has been the area where there has been the most new launch innovation,” said Hollands.

Despite the outflows, strong investment returns pushed total mutual fund assets up from £1.49tn to £1.62tn.

And Hollands believed 2026 could be a better year for the UK fund industry as interest rates continue to fall, sapping the attraction of cash savings accounts and helping to relieve pressure on personal finances.

 

(Bloomberg) — From Istanbul to Rome, central banks with senior vacancies are embracing the pedigree that comes with a career spent in US policymaking.

A spate of top hires at major monetary institutions since the pandemic have stood out for one thing in particular: they’re all officials returning from years of working stateside predominantly within the Federal Reserve system.

Most recent was the announcement on Monday of a new deputy governor at Turkey’s central bank, Gazi Ishak Kara, just weeks after the recruitment of its chief economist, Murat Tasci. That followed David Lopez-Salido, who started in the same position at the Bank of Spain in October. Switzerland and Italy have seen other recent standout examples.

All of those officials worked within the US network of reserve banks, either at regional branches of the Fed or its headquarters in Washington, shortly before taking up senior policy jobs in their home country.

The concept of repatriating staffers with the right nationality was previously more sporadic. The recent vogue underscores at the very least how governments and central banks are as susceptible to following trends as anyone, but also points to the cachet associated with steering the world’s biggest economy — even at a time when President Donald Trump is testing policymakers there.

“The Federal Reserve is an exceptional place for any central banker to gain first-hand experience,” said Selva Demiralp, a professor of economics at Istanbul’s Koc University and a former Fed economist. “When I graduated, my PhD advisor told me that there is no better way to learn central banking.”

Decision-makers hiring for monetary institutions outside the US have long treasured an education in America, and even time spent in academia there — witness governors appointed over the years ranging from former European Central Bank chief Mario Draghi to Mervyn King, and then Mark Carney, at the Bank of England.

But the concept of tapping nationals within the Fed system was less common. Most notably, Turkey’s government hired Fatih Karahan, an economist at the New York Fed, as a policymaker in 2023 before he then succeeded Governor Hafize Gaye Erkan when she was removed by President Recep Tayyip Erdogan in early 2024.

Karahan’s appointment marked the dawn of a broad economic overhaul after Erdogan’s reelection, drawing a line under years of populist policies that stoked runaway inflation. The central bank since raised interest rates to as high as 50%, while holding dozens of foreign investor meetings to reestablish credibility.

Of the two other former US officials, Tasci spent nearly 17 years at the Cleveland Fed before a short stint at JPMorgan in New York, while Kara has been focusing on financial stability at the Fed’s Board of Governors in Washington.

The appointments reflect a push by Finance Minister Mehmet Simsek — himself a former strategist at Merrill Lynch — to present candidates with strong economics backgrounds and experience for Erdogan’s approval.

“Considering the period before 2023, when several senior appointments lacked strong academic or practical central banking backgrounds, these recent hires suggest a clear intention to rebuild expertise and restore confidence,” said Demiralp.

At the Swiss National Bank meanwhile, Vice President Antoine Martin joined as a policymaker at the start of 2024, and took on the No. 2 job nine months later. The appointment answered Switzerland’s need for someone with expertise, the gravitas to help manage a still-pivotal reserve currency, and a fairly uncommon nationality.

Practically his whole career has been spent stateside, starting at the Kansas City Fed early this century before he shifted to its New York counterpart.

At the Bank of Italy, the hiring of Chiara Scotti, an official at the Dallas Fed, was announced in December 2023. She began as deputy director general a few months later.

“My experience at the Fed was very formative,” she said in an interview in November. “I’m proud to have experienced the best of both worlds.”

Lopez-Salido worked for almost two decades in monetary affairs at the Fed in Washington before moving to Madrid to run the Bank of Spain’s forecasting.

In addition to the “pull” factor for such officials going home to a senior job, the Trump administration has effectively also offered a “push.” The president’s allies have regularly blasted the Fed for its large staff of economists.

The issue even came up during Trump’s vetting of candidates for its next chair. Treasury Secretary Scott Bessent said in December that the president asked one of them why the Fed needed hundreds of Ph.D. economists. “There wasn’t a good answer,” Bessent said.

For global central banks meanwhile, some sort of American pedigree has long been treasured. At the ECB, Chief Economist Philip Lane’s doctorate at Harvard University helped bolster his candidacy. Former Vice President Lucas Papademos spent time early in his career at the Boston Fed.

But it was previously rarer for governments or central banks to look at the Fed system as an actual recruiting ground for senior officials.

Among prior examples in Europe, Athanasios Orphanides left the Fed in Washington in 2007 to serve a term as governor of the Cypriot central bank, while Emanuel Moench, a former head of research at Germany’s Bundesbank, joined from the New York Fed in 2015.

“The Fed is definitely an excellent training ground for central bankers,” said Moench, who is now a professor at the Frankfurt School of Finance. “There’s a great deal to learn there. The New York Fed, in particular, has the added benefit of a strong focus on financial markets and close ties to market participants.”

In contrast to peers, the UK stands out more than most as looking on the US central bank as a source of expertise without bothering too much about nationality.

At the Bank of England, current Financial Policy Committee member Randall Kroszner is a former Fed governor, and former Fed Vice Chair Donald Kohn served on the same panel. Former Fed Chair Ben Bernanke and Kevin Warsh, Trump’s nominee to become Fed chief, each produced reports on the UK central bank’s way of functioning.

In common with other institutions, the BOE also sends staff to Fed institutions for secondments. One example was former chief economist Spencer Dale. Another was the current governor, Andrew Bailey, who spent time at the New York Fed in 1987.

–With assistance from Baris Balci, Alessandra Migliaccio, Jana Randow, Ugur Yilmaz, Daniel Basteiro and Christopher Anstey.

©2026 Bloomberg L.P.