UK retail investors favour index trackers

Editorial

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This surge in tracker fund activity reflects a growing appetite for algorithm-driven portfolio management, as investors seek cost-effective, transparent, and rules-based exposure to global markets.

Alongside this, while UK equity tracker activity remained muted, European and North American strategies saw robust demand, suggesting a shift in geographic preference amid geopolitical uncertainty.

It is evident that investors are leaning into the reliability and efficiency of passive strategies. Index trackers offer a tech-powered way to stay invested without the emotional swings of active management, especially in volatile conditions.

This trend aligns with broader investor behaviour in the first half of 2025, which saw a total of £2.9 billion in net inflows despite a turbulent Q1. The second quarter alone brought in £4.8 billion, reversing earlier losses and underscoring investor resilience.

Also notable is the resurgence of mixed asset funds, which brought in £2.6 billion in H1, their first consistent period of inflows since 2021. These funds, often supported by automated asset allocation models, allow investors to delegate decision-making to professional managers, a strategy that has gained appeal amid market uncertainty.

June saw particularly strong flows into the 40-85% equity range, indicating that investors are not shying away from risk but are instead seeking diversified, tech-enhanced investment solutions that balance growth potential with downside protection.

As digital platforms and data-driven strategies continue to reshape retail investing, the IA’s latest figures suggest that UK investors are embracing technology not just in how they invest, but in what they invest in.

Miranda Seath, director, market insight and fund sectors at the Investment Association, comments: “sustained inflows into mixed assets funds uncover an interesting trend as investors come back to ‘investment solutions’ – we had seen persistent outflows from the mixed asset class between 2022 and 2024. In the face of heightened uncertainty, investors are now opting for strategies where investment managers calibrate allocations to equities and bonds on their behalf.”

Seath continues: “IA research suggests that a level of home bias continues to exist amongst end investors and attracting more people to investing could be a boost to UK equities in the long-term. However, as June data suggests, the current crop of investors is keeping a close eye on the UK economy – the Chancellor’s plans for this year’s Autumn Budget will be significant and investors will wait to see the impact of potential tax rises and if the economic outlook will improve.”