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Europe Fund Flows: European Investors Turned Their Backs on US Stocks in Q4 2025
A key theme in equities in 2025 was the great rotation toward European exposure. Trump's trade policies triggered a EUR 41.2 billion flight from US equity funds back into European markets.
Flows Into Bond Funds Exceed Equity Fund Flows For Third Year in a Row
European funds gathered EUR 139.0 billion of flows in the fourth quarter, down from EUR 180.0 billion in the third quarter, owing largely to a slowdown in flows into bond strategies. The industry closed 2025 with flows of EUR 696.3 billion, up from EUR 612.7 billion in 2024. Assets grew to EUR 15.4 trillion from EUR 14.3 trillion in 2024.
Equity funds attracted EUR 35.3 billion of flows in the fourth quarter, up from EUR 25.6 billion in the previous quarter to bring the annual total to EUR 186.6 billion. This was slightly down from EUR 193.2 billion in 2024.
This article is adapted from the recent report published by Morningstar Manager Research. The Morningstar European ETF and ETC Asset Flows report is available to download for free.
Source: Morningstar Direct. Data as of Dec. 31, 2025.
Flows into bond funds totaled EUR 85.2 billion in the fourth quarter, down from EUR 119.3 billion in the third quarter. For the third consecutive year, flows into bond funds exceeded those into equity strategies. In 2025, bond funds netted EUR 359.9 billion in flows, up from EUR 340.0 billion in 2024, setting a record high in the series.
Capital preservation funds, such as ultrashort-dated bonds, were another favorite with investors in 2025, gathering EUR 92.3 billion of flows. However, the bulk of the money came in the first half of the year when uncertainty and volatility were at their peak.
Defense Funds Shine as Thematic Funds Post EUR 37 Billion Outflows
Thematic funds recorded EUR 10.1 billion of outflows in the fourth quarter, a modest improvement from the third quarter but contributing to total outflows of EUR 37 billion in 2025. In the past three years, thematic funds have shed EUR 112 billion in assets.
Consumer-themed funds, classified under the Social thematic bucket, led outflows in the fourth quarter with EUR 3 billion in redemptions, followed by broad thematic strategies with EUR 2.7 billion. Both categories ranked among the largest drivers of outflows in 2025.
Security-themed funds, also part of the Social thematic bucket, were the standout theme of 2025, attracting EUR 8.6 billion of inflows for the year, of which EUR 514 million in the fourth quarter, as investors maintained their appetite for defense and security exposure amid rising geopolitical tensions and increased government defense spending.
Source: Morningstar Direct. Data as of Dec. 31, 2025.
Digital economy and digital infrastructure strategies, classified under the Technology thematic bucket, were a bright spot in the fourth quarter, ranking among the largest inflows for the period with EUR 183 million and EUR 101 million, respectively.
The Asset Class Split: Passive for Equity, Active for Fixed Income
Active equity funds saw outflows of EUR 40.8 billion in 2025. Although an improvement from the EUR 80.9 billion of outflows in 2024, this was the fourth year in a row of disinvestment from active equity strategies in Europe.
In contrast, passive equity funds gathered EUR 227.4 billion in flows in 2025, a slight decline from EUR 252.3 billion in 2024 but in keeping with the clear growth trend of the past decade.
The tables turn in fixed income, where active management dominates. Flows into active bond strategies in 2025 totaled EUR 310.0 billion, up from EUR 259.0 billion in 2024 and a record high for the decade.
Bond active managers have plenty of levers to pull to add value now that monetary policy has normalized. Passive bond funds attracted EUR 49.9 billion in flows in 2025, down from EUR 80.9 billion in 2024.
Source: Morningstar Direct. Data as of Dec. 31, 2025. Passive funds include ETFs and index funds
Source: Morningstar Direct. Data as of Dec. 31, 2025. Passive funds include ETFs and index funds.
Theme of the Year in Equities: European Equities Become a Refuge
The main theme in the equity space in 2025 was the large rotation out of US equities. The huge bet on US exposure in the fourth quarter of 2024, in the wake of the US presidential election, turned sour once President Donald Trump took office in 2025, and markets were taken by surprise by his approach to international trade policy.
Investors responded to this unexpected risk by diversifying geographical exposure, and, perhaps by default, European investors favored the home exposure they had purposely ignored for the best part of the past decade.
On aggregate, European large-cap funds (blend, value, and growth) netted EUR 41.2 billion in flows in 2025, compared with EUR 12.0 billion in outflows in 2024. In contrast, US large-cap funds (blend, value, growth) closed 2025 with EUR 6.2 billion on aggregate, a mere fraction of the EUR 98.3 billion invested in 2024.
Source: Morningstar Direct. Data as of Dec. 31, 2025
More on European Asset Flows
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European ETF Asset Flows Update
European Fund Flows Commentary
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