Foreign Investment Flows Return to UK Equities Amid Wall Street Valuation Concerns

Concerns surrounding artificial intelligence valuations on Wall Street have prompted a notable shift in capital allocation, with foreign investors increasing their exposure to UK equities after years of systematic underweighting. British fund managers report that profit-taking in US technology stocks, particularly high-flying names such as Nvidia and Meta, has redirected investment flows towards the London Stock Exchange.

The FTSE 100 index reached the psychologically significant 10,000-point threshold on Friday, marking a milestone achievement for Britain’s benchmark equity gauge. This development coincides with what several market participants characterise as a reassessment of concentration risk in American technology stocks, where valuations have reached levels that some consider unsustainable.

Adrian Gosden, who oversees £1.6 billion in assets at Jupiter Asset Management, suggested that the UK market is positioned to benefit from portfolio de-risking activities in 2026. He noted that with the Budget now behind investors and assuming currency stability, British equities could attract meaningful inflows from investors seeking to reduce exposure to stretched valuations elsewhere.

James Klempster of Liontrust Asset Management observed a “subtle change in emphasis” among global investors, with increasing attention paid to the fragility of the US equity market. According to his assessment, this shift has created opportunities for marginal capital flows to seek alternative destinations, a trend that has materialised over the past six months.

Research from Goldman Sachs in November highlighted a surge in foreign fund purchases of UK equities. Bank of America’s positioning data supports this narrative, indicating that global investors held a net underweight position of 24 per cent in UK stocks during December. Whilst this remains significantly below neutral positioning, it represents an improvement from the 29 per cent underweight recorded in November. Historical data reveals that Bank of America’s survey has registered overweight positioning in UK equities on merely two occasions since August 2021, suggesting the current shift may represent a meaningful turning point.

The performance differential between UK and US markets has strengthened the investment case for British equities. The FTSE 100 delivered its strongest annual gain since 2009 during 2025, outperforming Wall Street benchmarks. This combination of relative value, reduced political uncertainty, and superior recent performance has enhanced the attractiveness of UK equities for international capital.

The increased foreign interest stands in stark contrast to domestic investor behaviour. Data from Calastone indicates that UK-based investors withdrew more than £10 billion from global equity funds in the six months to December, representing the longest and most severe redemption period on record. UK-focused equity funds experienced particularly acute outflows, with net selling totalling £847 million over this period. This divergence between domestic and international investor sentiment continues to shape liquidity dynamics in the British equity market.