Bond funds were in favour in June, with investors piling in more than £1bn into fixed income portfolios, according to the latest Calastone Fund Flow index.
The wave of cash into the asset class was the third-largest in a single month since the firm’s records began. The report noted it was a result of investors rebalancing their portfolios away from expensive equity markets and towards assets offering steady income.
It continues a trend that has occurred through the first half of 2026. In total, bond funds attracted £2.3bn between January and July – although almost half came in June alone.
Edward Glyn, head of global markets at Calastone, said: "Investors are still willing to take risk, but they're becoming much more selective about how they do it. Rather than adding more money to equity markets after their strong run, many are building more balanced portfolios that combine growth potential with greater resilience.
"Bond funds are benefiting from an unusually attractive combination of high income and the prospect of capital gains if interest rates begin to fall. At the same time, geopolitical tensions, an uncertain economic outlook and elevated equity valuations are encouraging investors to rebuild the defensive side of their portfolios.”
It is not just bonds benefiting, however. Multi-asset funds took in almost £2bn in June, with £11.9bn added in the first half of the year, a record sum.
Glyn said: "The exceptional demand for multi-asset funds reflects the same theme. Investors increasingly want diversified portfolios at present without having to make big calls on whether stocks or bonds will outperform next. Multi-asset funds [are an] appealing choice at a time when the outlook remains unusually uncertain.”
Money market funds also returned to positive territory last month with a net £215m being taken in. However, this is a small rebound from the prior two months, in which investors withdrew more than £1.3bn.
While money market funds were positive in the first quarter, with net inflows of £285m, they suffered net outflows of £1.1bn in the second quarter and therefore for the half.
"Cash funds continue to attract some inflows, but the much stronger demand for bonds and multi-asset strategies suggests investors are moving beyond simply preserving capital. They are looking for portfolios that can generate returns while remaining resilient if markets become more volatile,” said Glyn.
To fund these purchases, investors have clearly been moving away from stock markets. Equity funds were sold off strongly in the first quarter of the year (net outflows of £3bn) and only recovered £389m in the second quarter.
Overall, equity funds shed £437m in June, despite broadly flat returns, with Asia Pacific funds particularly hit, with net selling of £312m. These portfolios suffered their 38th month of consecutive outflows in June, the report noted, with £7bn leaving the asset class since May 2023.
They were far from alone. All equity fund sectors experienced outflows last month, with the exceptions of global and US equity portfolios, which gained a net £328m and £200m respectively.