Institutions boost stock sales as index investors bought ahead of Iran war

After a one-month slowdown, institutional investors ramped up their equity selling in February by nearly 30% month over month, while index and exchange-traded funds (ETFs) increased their buying by more than 19%.

Institutions sold a net $61.27 billion of equities in February, up from $47.47 billion in January and the 12-month average of $41.12 billion in net sales, according to the latest S&P Global Market Intelligence data.

That level of net selling by institutional investors was the second-largest such wave since Market Intelligence began tracking monthly capital flows in 2022, surpassed only by the net stock sales of $66.43 billion in December 2025.

"Institutions ramped up their pace of supply as AI-driven disruption and private credit pressures collided," said David Sim, an equity research associate for Market Intelligence. Speculation of an AI bubble in the private credit market has investors worried.

"The data confirms this decay in conviction," Sim said. "Institutional outflows were concentrated across capital markets and software - stocks paid the price - and these areas have emerged as particularly vulnerable."

Institutional investors have sold a net $493.45 billion in stocks since the end of February 2025.

"Right now, it looks like we are in for an unprecedented year of institutional selling, and that we would need to see significant macro-level shifts to support a reversal of these trends," Sim said.

By comparison, index and ETFs bought a net $293.76 billion since the end of February 2025. Index and ETFs bought a net $25.06 billion of stocks in February, up from $21.03 billion in January and the $19.73 billion over the past 12 months, the data shows.

ETF inflows were concentrated in oil, gas, and consumable fuels, as well as in aerospace and defense, as the war in Iran began at the end of the month.

"Investors favored low-cost passive basket products over individual stocks as the risks of war and geopolitical uncertainty intensified toward the end of the month," Sim said.

Retail investors, a group that sold a net $5.31 billion of stocks in February after buying net $18.83 billion in January, reduced their exposure in six of 11 sectors as fear seemed to be driving some of this divestment, Sim said.

Hedge funds increased net buying to $8.01 billion in February, up from $3.13 billion in January. The purchases were predominately in tech, a sector this group has been quick to shift their stance on, Sim said.