UK stock funds saw a record outflow of £1.8 billion during May, according to data published by the Investment Association (IA).

The May outflows continue an established trend of outflows from UK equity funds, with £13.6 billion withdrawn in 2023, and £12 billion in 2022.

“Investors and their advisors continue to reallocate outside of the UK, with strong inflows for global, Europe and North American funds,” said the IA.

Overall, UK savers took £136 million out of funds in May 2024, following two consecutive months of positive sales.

Combined sales of £3.6 billion in March and April were boosted by investors topping up their stocks and shares ISAs at the end of the 2023-24 tax year and investing early to maximise returns in the new tax year.

Inflows to index trackers remained strong with net retail sales of £2.1 billion. This included inflows of £1.2 billion into equity trackers and £815 million in bond trackers.

Bond funds saw the highest outflows with £318 million withdrawn, followed by £294 million from mixed asset funds and £195 million from equity funds.

Whilst equity funds saw an outflow overall, sales into global equity were £434 million in May, making it the top selling IA equity sector.

Short Term Money Markets was the best-selling sector in May with net retail inflows of £696 million.

Miranda Seath, Director, Market Insight & Fund Sectors at the Investment Association, said: “Despite net retail sales returning to negative territory in May, monthly outflows of £136 million represent a relatively modest dip compared to what we have seen over the past 12 months.

“Whilst flows have turned negative, this follows a boost of £1.3 billion in inflows in April, driven by UK ISA season, and overall, they remain substantially above the average £2.1 billion monthly outflow for the preceding 12 months.

“Our May data could be a sign that investor confidence is stabilising. Whilst geopolitical uncertainty remains, much is set to be decided at the ballot box over the coming months, and investors will get used to a new political landscape.

“Looking forward, there are reasons to be positive as we expect interest cuts in the UK and potentially in the USA later this year as inflation continues to fall. As outlook potentially improves, we will be keeping a close eye on how investors respond.”