Europe has dropped from the best-performing market in 2025 to the worst in 2026 so far and investors have moved with their feet, according to fund flow analysis by Trustnet.
Last year the EuroStoxx index was up 32.2% in sterling terms, some 8 percentage points ahead of the 24.4% gain made by the MSCI Emerging Markets index in second place.
Yet this year, its 9% return is bottom of the seven-strong list, which includes the US's S&P 500 and UK's FTSE All Share.
Performance of indices over YTD
Source: FE Analytics
A net £3.8bn was removed from the 11 funds in the IA Europe Excluding UK sector with outflows of more than £100m, while just £942m was added to the portfolios with net inflows above the same threshold.
Notably, large index trackers topped the most-sold table below, with investors pulling a net £981m from iShares Continental European Equity Index – the most of any fund in the peer group.
The fund went from assets under management (AUM) of £7.6bn at the start of the year to £7.3bn by the halfway stage as £690m of performance was outweighed by the outflows.
Vanguard FTSE Developed Europe ex-UK Equity Index (£864m in outflows) was second while HSBC European Index (£339m) was third.
All are cost-effective ways to invest on the continent, but the outflows suggest they have suffered from investors taking some profit in the first half of the year as uncertainty increased.
In particular, Europe was adversely affected by the war between the US and Iran, which closed the strait of Hormuz – an important waterway for the passage of oil.
Source: FE Analytics. All figures for UCITs and OEIC funds. Data does not include ETFs or SICAVs.
Splitting the active strategies was BlackRock European Dynamic, a favourite of analysts at Barclays Direct Investing, who said the unconstrained, concentrated fund is managed from one of the most experienced European equity teams, headed by Giles Rothbarth.
"We believe this is really important as their experience and rigorous research process helps drive successful stock selection and ultimately performance returns," analysts said.
Perhaps it was another casualty of the risk-off appetite in the first half of the year, as its 11% return is a second-quartile effort in its peer group.
Although investors pulled £393m from the fund in the first half of 2026, its AUM actually rose £100m from around £4.9bn to £5bn as a result.
Throughout the list above, funds have made money for investors, suggesting movements have been caused by nervousness rather than a drop in performance.
Fidelity European, managed by Samuel Morse and Marcel Stotzel, rounded out the top five, with investors taking £249m from the portfolio between January and the end of June.
Analysts at FE Investments said managers Morse and Stotzel have a long-term mindset and avoid overreacting to short-term headwinds.
They use a 'three reasons' sheet, ensuring that their core thesis for the stock remains intact in the event of any minor disruption, and believe being fully invested is key to long-term success.
"In the idea-generation process, they rely on the huge resources available at Fidelity and on the highly competent central analyst team," they said. "The fund would suit an investor looking for core European exposure that should provide a lower-risk profile."
On the other side of the equation, only two funds took in more than £250m in the first half of 2026. Liontrust European Dynamic headed the gainers. Managed by FE fundinfo Alpha Managers James Inglis-Jones and Samantha Gleave, the fund uses their cashflow modelling.
Analysts at Titan Square Mile gave the portfolio an 'A' rating and said the strategy has gradually evolved over time. "The managers believe that cash flow is the primary, long-term determinant of shareholder returns," they said, and that investors frequently undervalue free cashflow.
"Therefore, they aim to invest in attractively valued companies with strong cash generation, which are run by capable company managers who are committed to using the cash flow in an intelligent manner."
The other fund to achieve significant inflows was Artemis SmartGARP European Equity, headed by Alpha Manager Philip Wolstencroft. RSMR analysts recommend the fund, which uses the same investment process applied throughout the SmartGARP range.
It starts with a quantitative tool to screen companies based on financial and macroeconomic metrics, narrowing the universe from 7,500 stocks to 1,500.
Companies are ranked across eight factors ranging from estimate revisions and growth to environmental, social and governance (ESG) factors, focusing on growing companies that can be bought at a reasonable price.
"This fund is suitable as a core investment or for use alongside a large cap or passive vehicle," the RSMR analysts said. "The mid-cap weighting is significantly higher than that of the market and introduces investments that are often not found in the fund's peers. In this way, the fund provides diversification, particularly relative to strategies that are more growth or large-cap orientated."