Investors' Mixed Appetite for Equity Funds in Q3 2025
Investors have shown a mixed appetite for equity funds in the third quarter of 2025, with significant inflows and outflows across various sectors and themes. Derivative-income funds led inflows, while healthcare and ESG-focused funds faced redemptions.
Derivative-income funds, such as those offered by JP Morgan, attracted a substantial US$13.4 billion in inflows. Meanwhile, healthcare-focused vehicles saw significant outflows, totalling US$17.9 billion. Vanguard health care fund and T. Rowe Price health sciences fund were among the hardest hit, losing US$4.8 billion and US$2.0 billion respectively.
European equity funds fared better, with notable inflows into Vanguard FTSE Europe ETF (+US$6.0bn), Amundi Core STOXX Europe 600 (+US$4.8bn), and iShares Core MSCI Europe (+US$3.6bn). This comes as trading volumes in European equities surged by 29% year over year to €16.4 trillion by the end of September 2025.
However, ESG-labeled equity funds witnessed US$16.8 billion in redemptions, with BlackRock's ACS climate transition screened & optimized world equity fund seeing a significant US$14.7 billion in outflows. Energy equity funds also suffered, with US$12.5 billion in outflows, led by the energy select sector SPDR fund's US$7.0 billion loss.
Notably, JP Morgan hedged equity funds (JHEQ I, II) held short positions of US$30 billion notional of 5% out of the money calls on the S&P 500 and long equivalent puts as of 30 September 2025.
In total, investors allocated US$27 billion to European equities in 2025. Despite the mixed performance, European equities continue to attract significant investment, reflecting investors' ongoing interest in the region. The performance of ESG-focused funds, however, remains a concern, with leading providers such as iShares and JPMorgan seeing substantial outflows.
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