Investors Turn To Non-US Equity Funds

European and Asian inflows into world ex-US funds hit record levels amid fears over US policy direction

Global investors are shifting capital away from the United States and into equity funds that exclude American stocks, in a marked departure from recent trends. The reversal comes amid renewed uncertainty following Donald Trump’s return to the White House and his aggressive use of trade tariffs.

Funds that omit US equities drew $2.5bn in inflows between December and April, according to Morningstar data. More than $2.1bn of that arrived in the last three months alone, setting a monthly record for net new investments and reversing three consecutive years of outflows.

The surge has spurred a flurry of new fund launches. BlackRock, Germany’s DWS, and France’s Amundi have all introduced ETFs targeting non-US equity markets. Amundi listed its ex-US ETF in September, ahead of Trump’s election victory.

“There is a question mark about the US’s role in the global economy,” said Kenneth Lamont, principal analyst at Morningstar. “The US has long been the default destination for global capital. Now some investors are asking whether that position is still deserved.”

Flight from Wall Street

The outflows from US-focused funds follow a decade in which Wall Street vastly outperformed. Between 2022 and 2024, investors pulled $2.5bn from global equity portfolios that excluded the US. Over that period, the S&P 500 rose 25%, compared to a 7% gain for the MSCI World ex-USA index.

But recent political shocks have upended those assumptions. Trump’s sweeping new tariffs — including a 145% duty on most Chinese goods — have prompted fears that his protectionist agenda may harm US growth more than it deters foreign competition.

Lamont described the shift as both a reaction to policy risks and a “patriotic rebalancing” among European investors. “There’s a sentiment among some that they no longer wish to have exposure to the US, due to the political direction taken in Washington,” he said.

Structural Rebalancing or Sentiment Shift?

While some flows may reflect political discomfort, others appear to be driven by portfolio reweighting. Benoît Sorel, global head of ETFs and smart beta at Amundi, said investors had grown wary of concentrated exposure to US stocks — particularly the so-called Magnificent Seven technology giants, whose valuations have become volatile.

“The S&P 500 and MSCI World are heavily skewed to the US — in the latter’s case, more than 70 per cent,” Sorel noted. “After years of chasing performance, investors are reassessing the risks of that concentration.”

Several of the tech sector’s leading lights — including Nvidia and Tesla — have experienced sharp price swings this year, further fuelling concerns about US market dependency.

Tariffs Take Centre Stage

The renewed appetite for ex-US assets coincides with a string of abrupt policy shifts in Washington. Trump’s announcement of across-the-board tariffs triggered a wave of market volatility, prompting his administration to suspend some levies for a 90-day negotiation window. However, duties on Chinese imports were increased to 145%, drawing retaliatory action from Beijing.

The resulting dislocation has reverberated through global supply chains and is forcing corporations — and now investors — to reconsider the resilience of the US economy.

“A lot of the decisions have surprised the market,” Lamont added. “The structure and scope of these tariffs were broader than expected. That’s shaken confidence.”

Exclusions Gaining Traction

The trend away from US equities may have legs. ETF providers are reporting rising interest in products that strip out US exposure — a strategy once viewed as niche.

Lamont said he expects demand to remain strong as long as macro risks persist and Trump’s policy trajectory remains unpredictable.

Despite the record inflows, global ex-US funds still represent a small portion of overall assets under management. But their rapid recovery, regaining three years of outflows in just five months, suggests a shift in sentiment that could endure.

“Investors are no longer treating US stocks as untouchable,” Lamont said. “The question now is whether that’s a short-term hedge or the start of a broader strategic rethink.”