Investors’ appetite for risk revives despite global tensions, but where are they putting their cash?

Investors are moving £1.5 billion into equities, signalling renewed market confidence as money begins to flow out of the defensive assets that have dominated portfolios for much of the past year, according to the latest industry data from the Investment Association (IA).

The figure, which marks the sixth consecutive month of positive net retail fund inflows for the UK investment industry, represents a modest increase on March’s £1.3 billion. But the more telling shift lies in where that money is coming from: for the first time since August 2025, investors have withdrawn cash from money market funds.

Why investors are leaving the safety of cash

Money market funds – short-term, low-risk instruments that act as a temporary shelter during periods of uncertainty – saw £755 million leave in April. This reverses a trend that saw record inflows of £2.01 billion into the same category in March, when concerns over Middle East conflict and persistent inflation drove a flight to safety.

Miranda Seath, director of market insight and fund sectors at the IA, described the reversal as “particularly striking”. She added: “For much of the past year, investors have been holding capital in short-term cash-like assets, understandably so, given the level of uncertainty in markets. The fact that we are now seeing that money begin to move is an encouraging sign that investors are starting to feel more confident in the investment outlook, particularly for the US following a strong month of North American equity inflows.”

The IA’s Short-Term Money Market sector was the worst-selling category in April, and the IA Targeted Absolute Return sector – another conservative strategy – also saw outflows of £114 million, reversing three consecutive months of inflows.

Equity funds: outflows narrow, trackers favoured

While equity funds collectively remained in net redemption territory, the pace of selling slowed markedly. Outflows from equity funds totalled £689 million in April, roughly half the £1.3 billion recorded in March, as global stock markets rebounded.

Investors showed a clear preference for index trackers over actively managed strategies. Equity tracker funds attracted £1.7 billion in net inflows, while actively managed equity funds suffered outflows of £2.4 billion – a divergence that underscores the continuing shift toward passive, lower-cost approaches.

At the regional level, North American equities were the clear winner, drawing £860 million – the strongest monthly inflow to the sector since April 2025. The performance of US-listed stocks was buoyed by a robust corporate earnings season: according to Bloomberg, 84% of the 485 S&P 500 companies that reported first-quarter results beat analyst estimates.

In contrast, other major regions saw net outflows. UK equity funds lost £673 million, global emerging markets gave back £477 million, Asia shed £399 million, and European equity funds saw £244 million leave.

Technology’s role in the turnaround

A significant driver of renewed investor appetite has been the technology sector. The IA Technology and Technology Innovation sector recorded net inflows of £96 million in April – its first positive month in seven. This follows a string of better-than-expected earnings from the largest US tech firms.

Alphabet reported first-quarter revenue of $109.9 billion, up 22% year-on-year, with earnings per share of $5.11 beating analyst forecasts of $2.66. Google Cloud revenue accelerated 63% to $20 billion, driven by AI solutions. Amazon posted net sales of $181.5 billion, a 17% increase, and earnings per share of $2.78 against estimates of $1.63; its AWS segment saw operating income of $14.2 billion and sales growth of 28%. Meta reported earnings per share of $7.31 versus the $6.67 consensus, with revenue rising 33% to $56.31 billion and family daily active people reaching 3.56 billion. Nvidia set a new record with first-quarter fiscal 2027 revenue of $81.6 billion, up 85% year-on-year, and GAAP earnings per share of $2.39. Chief executive Jensen Huang highlighted the accelerating buildout of “AI factories” and demand for AI computing power.

The broader artificial intelligence investment landscape has been fuelling this momentum. Global startup funding hit a record $297 billion in the first quarter of 2026, with AI startups absorbing $242 billion – 81% of all venture capital – and four of the five largest venture rounds in history occurring in the same period. Big Tech companies are planning a combined $725 billion in AI infrastructure spending for the full year; Amazon Web Services, Microsoft Azure and Google Cloud alone spent $87 billion on capital expenditure in Q1 2026. Nvidia continues to dominate the AI hardware market, controlling an estimated 81% of AI data-centre chips, and the rise of agentic AI – systems that can plan and act independently – is gaining traction, with more than 40% of organisations having AI agents in production by January.

Bond funds return to favour

Fixed income markets also saw a reversal of fortune. Bond funds returned to net inflows of £466 million in April, recovering from March’s outflow of £966 million. Mixed Bond funds were the best-selling fixed income sector, attracting £373 million. Sterling Corporate Bond funds took in £85 million, and Sterling High Yield saw slightly lower inflows of £79 million. UK Gilts attracted £67 million, while the broader Government Bonds category continued to shed assets, with £147 million redeemed.

Seath noted that the big question now is whether this momentum broadens out, or whether geopolitical uncertainty keeps risk appetite fairly contained. The data from April suggests investors are increasingly willing to look past that uncertainty and put capital back to work.