Greenland Tensions Stir Investor Nerves, Driving Continued Outflows from European and UK Equity Funds

Geopolitical tensions linked to Greenland contributed to renewed investor withdrawals from European and UK equity funds in January, according to the latest fund flow index from global funds network Calastone. Equity funds recorded net outflows of £697 million during the month, extending the streak of monthly selling to eight consecutive months. European and UK equity funds were hit the hardest by the trend. Calastone said flows were relatively balanced in the early part of January before sentiment deteriorated as markets reacted to the prospect of US tariffs tied to rising tensions around Greenland. Outflows accelerated from 19 January and continued through to the end of the month.

European equity funds experienced their worst month since January 2025, with investors withdrawing £237 million. UK-focused equity funds also faced heavy selling pressure during the second half of the month, finishing January with net outflows of £694 million. By contrast, other regional equity sectors were largely unaffected by developments linked to Greenland. Asia-focused equity funds continued to see outflows broadly in line with recent averages, while Japanese equity funds recorded smaller outflows than in previous months. Emerging markets, global and North American equity funds all recorded net inflows during January.

Fixed income funds attracted £459 million of net inflows, broadly in line with the average of the previous six months. Demand was concentrated in corporate bond funds, while sovereign bond funds experienced outflows. Mixed asset funds gained £1.05 billion, also matching their long-term monthly average, reflecting their continued use in regular savings plans. Money market funds, however, recorded their first net outflow since April 2024, which Calastone noted is typical for January as households manage post-holiday expenses.

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. It shows, however, that it doesn’t 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.”

By fLEXI tEAM