City of London Investment Group FuM Climbs 13.9% Despite $1.3 Billion of Net Outflows

City of London Investment Group's pre-close update delivers a mixed but broadly resilient picture. Funds under management reached an estimated $12.3 billion at 30 June 2026, up 13.9% year on year, while second-half net outflows moderated compared with the first half.

The catch is that this growth did not come from positive net client flows. CLIG recorded $1.3 billion of net outflows across the year, with favourable markets and investment performance adding $2.8 billion and more than offsetting those withdrawals.

For investors, the central question is therefore straightforward: can stronger investment performance and healthier sales activity eventually translate into sustained net inflows?

CLIG's FY26 figures at a glance

Funds under management, or FuM, refers to the value of client assets managed by the business. It matters because asset managers typically earn fees based partly on those assets.

FY26 measure	Reported figure
Estimated FuM at 30 June 2026	$12.3 billion
Year-on-year FuM growth	13.9%
Gross inflows	$566 million
Gross outflows	$1.9 billion
Net outflows	$1.3 billion
Market and investment performance contribution	$2.8 billion
First-half net outflows	$853 million
Second-half net outflows	$483 million

The improvement in the second half is encouraging. Net outflows fell from $853 million in the first six months to $483 million in the second, a reduction of $370 million.

That is movement in the right direction, but investors should not confuse slower outflows with a return to growth from client demand. Money was still leaving on a net basis at the end of the year.

Market performance did the heavy lifting

The FuM bridge tells the clearest story. CLIG began FY26 with $10.8 billion of assets. It attracted $566 million of gross inflows but suffered $1.9 billion of gross outflows, producing net outflows of $1.3 billion.

Market movements and investment performance then added $2.8 billion, lifting estimated closing FuM to $12.3 billion.

This is positive because asset growth can support the fee-earning base. The Group also described relative performance as robust, suggesting its active investment approaches held up well over the full year.

However, market-led growth can be less dependable than gathering new client money. Markets can reverse, and the announcement notes that heightened volatility and a sharp March drawdown offset some earlier gains during the second half.

CLIG's closing FuM is therefore a stronger headline than the underlying flow data alone would suggest.

Where the outflows occurred

CLIG consists of two operating businesses: City of London Investment Management, known as CLIM, and Karpus Investment Management, or KIM.

CLIM ended the year with estimated FuM of $8.1 billion, up from $6.8 billion. Its strategies suffered $1.2 billion of net outflows, but market and investment performance contributed $2.4 billion.

CLIM strategy	Net flows	Market and investment performance	Estimated June 2026 FuM
Emerging Markets	-$872 million	$1.7 billion	$4.5 billion
International Equity	-$214 million	$587 million	$2.9 billion
Opportunistic Value	-$11 million	$26 million	$324 million
Listed Private Equity	-$38 million	$24 million	$204 million
Other	-$16 million	$59 million	$193 million

Emerging Markets accounted for most of the Group's withdrawals, recording $872 million of net outflows. Even so, it remained the largest strategy and finished with $4.5 billion of FuM after receiving a $1.7 billion contribution from markets and investment performance.

International Equity generated CLIM's strongest gross inflows at $234 million, but outflows of $448 million still resulted in a $214 million net withdrawal.

KIM's experience was steadier. Its FuM rose from $4.0 billion to $4.3 billion, with $185 million of net outflows offset by a $466 million performance contribution.

Growth Balanced recorded KIM's largest net outflow at $85 million. Taxable Fixed Income was the only listed strategy to deliver positive net flows, attracting $8 million after $60 million of inflows and $52 million of outflows.

Are the withdrawals a strategic warning sign?

Management attributed the outflows primarily to client rebalancing, pension de-risking and liquidity requirements. It characterised these as broader industry dynamics rather than concerns specific to CLIG's strategies.

That explanation offers some reassurance, particularly alongside the reported relative investment performance and continued gross inflows. CLIG attracted $342 million at CLIM and $224 million at KIM, showing that its products are still winning some new allocations.

Still, the scale of gross redemptions cannot be ignored. Total outflows of $1.9 billion were more than three times gross inflows of $566 million. Investors will want future updates to show that improved engagement and marketing are doing more than merely slowing the rate of withdrawals.

The Group said it had reaffirmed its investment-led culture, strengthened collaboration between portfolio teams and increased empowerment and accountability. It has also engaged with clients to identify areas for improvement and growth.

These initiatives sound sensible, but their financial effect is not yet disclosed. Evidence of success would be a shift towards positive net flows, especially in Emerging Markets, International Equity and Growth Balanced.

Dividend expectations provide some stability

The Board expects the final dividend for FY26 to be in line with the previous year. The proposed amount was not disclosed in this update.

The final dividend and audited full-year results are due to be announced on 15 September 2026. The annual general meeting is scheduled for 26 October, with payment expected in November 2026, similar to the previous year's timing.

Maintaining the final dividend would be a welcome sign of confidence. CLIG also referred to a robust cash position that provides stability and strategic flexibility, although the size of that cash position was not disclosed.

Investors should remember that the figures in this update are unaudited. The September results should provide fuller detail on profitability, costs, cash generation and dividend cover.

What CLIG investors should watch next

The 13.9% increase in FuM is clearly helpful, while the slowdown in second-half outflows suggests the direction of travel improved as FY26 progressed. Strong market and investment performance also demonstrates the value that active management can create when conditions are favourable.

The weakness is that organic growth remains absent. Market gains of $2.8 billion masked $1.3 billion of net client withdrawals, leaving CLIG dependent on investment performance to expand its asset base.

The next results will matter less for confirming the already reported $12.3 billion of FuM and more for revealing how that asset level translated into financial performance. Investors should focus on margins, cash generation, the final dividend and any evidence that renewed client interest is converting into positive net flows.