Exchange-traded funds (ETFs) focused on technology suffered outflows of £5bn in the first four weeks of August, marking just three months of outflows within the asset class since February 2025.
The figure also contrasts with the £9.4bn of net inflows in the month of July.
On a year-to-date basis, the IA Technology and Technology Innovation sector has returned 25 per cent, compared with a return of 10 per cent for the IA Global sector in the same time period.
But on a three-month view, the Technology sector has lost money, being down 0.46 per cent, while the IA Global sector was just over 2 per cent.
Marcus Weyerer, director of ETF Investment Strategy at Franklin Templeton, said the causation around technology is not a sign of wider discontent among ETF investors.
Technology has seen a sharp reversal in flows, while small caps are attracting capital
He said: “This does not appear to be a wholesale retreat from equities.
“Small-cap ETFs have attracted more than $3.1bn so far in August, putting them on track for one of their strongest months over the past two years, while Growth ETFs have gathered around $16.6bn, broadly in line with trend.
“The message from ETF flows is therefore not that investors are abandoning equities, but that they are becoming more selective about where they take risk.
“Technology has seen a sharp reversal in flows, while small caps are attracting capital and growth strategies continue to see healthy demand.”
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David Jane, multi-asset investor at Premier Miton, spoke about the investment case for technology stocks, specifically around whether they are starting to represent value.
He said: “Value doesn’t really come into it when we need to make so many assumptions about the future, in particular for the semiconductors. These are highly cyclical and low P/Es in highly cyclical industries can be more of a sell signal than a buy signal.
“That said, the tech monopolies which have been spending so much on the AI build-out do remain monopolies, so if and when they scale back the capex will return to being highly cash generative, and therefore we have been rebuilding tentatively some positions there where we continue to trim semiconductors.”
He added that it has become noticeable that smaller companies have started to outperform relative to the mega caps.
Jane said: “In the US, the Russell 2000 contains plenty of stocks in the $5bn —$10bn range which is perfectly liquid for our strategies – same for Japan and so on.
“The bottom end of the FTSE is in that range. We wouldn’t generally get involved in UK small cap as it’s far too illiquid and our strategies need to be scalable.
“For us, we have made a small move down into what we would term mid caps and we recognise that mega cap has certainly been lagging lately.
“You can see this in the relative performance of equal weight indices. This has mainly been in the US and Japan.”
david.thorpe@ft.com