Outflows of investment funds by UK savers have slowed considerably according to the latest monthly figures, as fixed income funds have started to attract their first inflows of the year.

In July, £129m was withdrawn from funds, according to data from the Investment Association (IA), compared to near-record outflows of £4.5bn in June and £822m in May. July was the sixth month of net retail releases this year.

But there were inflows into many funds, with fixed income funds seeing their first month of inflows this year, while tracker funds also rebounded this month, especially fixed income trackers.

The most popular AI fund sectors were short-term money market funds and corporate bond funds, with net retail sales of £513m and £495m respectively, followed by funds managed for volatility, UK gilt funds and global equity income.

Across Europe, a fund flow tracker run by Citigroup also suggested outflows from traditional asset managers slowed in August, to -0.3% from -0.5% in July.

Despite positive markets in July and August, “the combination of weak investor sentiment and weak flows means that the sector’s valuation has not risen commensurately,” said Citi analysts, who have noted that shares of listed fund managers had been further downgraded.

The fund management sub-sector is now trading around 20% below its long-term average, analysts said, saying they remained “selective”, with a preference for “more defensive names with higher larger valuation dislocations”, with “purchases” for Amundi and Man Group. PLC (LSE:EMG) against “sell” for Jupiter Fund Management PLC (LSE:JUP)/Abrn PLC (LSE:ABDN).

Meanwhile, investment trusts have seen record demand, according to data from the Association of Investment Companies (AIC) of purchases through financial advisers and wealth managers.

Some £361million was used to buy shares in investment funds in the second quarter, 20% more than a year ago, and the second highest quarterly figure on record, with strong demand net worth of £151million, the second highest figure on record.

In the first half of this year, around £700m was spent on closed-end investment companies, the highest level of purchases on record in a six-month period.

The ‘flexible investing’ sector, which houses investment firms that can invest in different asset classes such as RIT Capital, Capital Gearing, Caledonia, Personal Assets and Ruffer, was particularly popular, accounting for 17% of purchases .

These trusts, many of which offer a capital preservation or inflation protection theme, have tended to dominate the most purchased listings for investment platforms this year.

The global sector, which is led by stalwart FTSE 100 Scottish Mortgage and blue-chip returnee F&C Investment Trust, and had held the top spot for purchases for the previous five years, fell to second place in the second quarter with 13% of purchases.