Net retail sales recorded inflows of £1.36 billion in March, extending a fifth consecutive month of inflows though at a slower pace than February’s £2.52 billion, according to data published today by the Investment Association (IA).
March saw a clear shift towards defensive positioning, following a tempered return to equity markets through index trackers in the first two months of the year. Investors favoured cash-like assets and diversified strategies, with record inflows into money market funds at £2.01 billion and continued demand for mixed assets (£1.08 billion). Equity outflows accelerated to -£1.32 billion while bonds returned to outflows of -£0.97 billion.
Flows proved relatively resilient despite heightened geopolitical tensions, including conflict in the Middle East. This is particularly pronounced when compared with the response to Russia’s invasion of Ukraine in 2022, when £2.5 billion and £3.5 billion were withdrawn from funds in February and March respectively amid broader macroeconomic pressures. Recent polling by the IA and Opinium supports this, showing that 47% of investors do not plan to make immediate changes to their portfolios, while only a small proportion intend to withdraw money from investments and hold it in cash.
ISA season also provided support, with £1.4 billion invested in March marking the strongest start to the season since 2021 as investors made use of annual tax allowances. In contrast, March 2025 saw inflows of £929 million.
The first quarter of 2026 was shaped by a complex geopolitical backdrop, including a US intervention in Venezuela and conflict in the Middle East. Quarterly flows have remained positive at £4.5 billion, the first quarter of net inflows since Q2 2025 (£4.7 billion), signalling a partial return of investors following a period of policy-driven uncertainty in the run-up to the Autumn Budget.
Key findings for March 2026
- Equity outflows widened to -£1.3 billion, compared with -£445 million in February. Europe and Global were the only regions to record inflows, with £29 million and £135 million respectively, while North America returned to outflows of -£240 million following February’s £417 million inflows. The UK saw redemptions of -£580 million, with Asia (-£161 million) and Japan (-£86 million) also in outflow.
- Money market fund inflows surged to £2.01 billion, the strongest monthly inflow on record, as investors favoured greater liquidity and defensive positions amid heightened uncertainty.
- Fixed income saw outflows of -£966 million, reversing four consecutive months of inflows. Mixed Bond (£140 million) and Global Inflation Linked Bond (£114 million) led inflows within the asset class, while UK Gilts returned to outflows of -£108 million and Government Bonds saw continued outflows of -£124 million.
- Mixed asset funds recorded robust inflows of £1.1 billion, marking a second consecutive month of strong sales.
- Active funds attracted more modest inflows of £448 million compared with February’s £1.6 billion, while tracker funds saw inflows of £915 million compared with £890 million in February. Active equity outflows increased to -£2.1 billion from February’s -£1.3 billion.
- Across other sectors, Targeted Absolute Return had a significant month with inflows of £514 million (£278 million in February), while Volatility Managed recorded softer inflows of £138 million.
- Responsible Investment funds saw outflows of -£483 million, including -£537 million from SDR-labelled funds.
Key findings for Q1 2026
- Total net retail sales reached £4.5 billion, marking the first quarter of inflows since Q2 2025 (£4.7 billion). This follows a weaker second half of 2025, when flows were dampened by policy uncertainty in the run-up to the Autumn Budget.
- Equity funds saw outflows of -£3.7 billion over the quarter. While still significant, this represents an improvement on Q3 (-£6.4 billion) and Q4 (-£7.9 billion) 2025.
- Fixed income funds recorded modest inflows of £368 million. However, March’s outflows brought an end to a four-month run of positive flows into the asset class.
- Mixed asset funds saw strong inflows of £2.7 billion, reflecting continued investor demand for diversified strategies amid market uncertainty.
- Active funds also saw resilient inflows of £1.4 billion, the highest quarter since Q4 2021. Notably, February saw active funds overtake tracker funds for the first time since November 2021.
Investors limit risk and move to MMFs and diversified strategies
Asset allocation patterns in Q1 suggest a more cautious approach to equities, with outflows recorded throughout the quarter. Where investors are allocating to equities, there are signs of diversification away from the US and UK.
Outflows from UK equity funds increased to -£580 million in March, despite strong performance, as investors adjusted exposure to assets most affected by the Iran war and its domestic economic impact. This weighs on confidence in the near term: IA and Opinium research suggests that, while confidence in investing in global and European companies hasn’t worsened between the outbreak of the war and April, in the UK, it has fallen by 10 percentage points (to 57%), although it remains above levels reported for the US.
In contrast, Global Emerging Market equities recorded inflows of £317 million in March, marking a fourth consecutive month of demand, as transition economies benefit from a depreciating dollar. The same IA research also shows rising confidence in emerging markets, increasing from 54% in March to 60% in April, suggesting investors continue to favour diversification.
Alongside this, investors increased allocations to cash‑like assets, with a record £2.01 billion flowing into money market funds. While survey data indicates that confidence in long-term investing remains broadly unchanged, this shift points to more cautious positioning in the near term.
Source: The IA & Opinium, How confident do you feel that investing in companies in the following markets would help you to meet your financial goals? Base: 1,000 investors
Miranda Seath, Director, Market Insight & Fund Sectors at the Investment Association, said:
“March marked a fifth consecutive month of positive net retail sales, with inflows of £1.36 billion, albeit at a slower pace than February. As geopolitical uncertainty intensified with the outbreak of conflict in the Middle East, investors became more cautious, with a clear shift towards defensive positioning. Record demand for money market and higher inflows into mixed asset funds highlights an ongoing focus on liquidity, diversification and risk management. Investors stepped back from equity markets across most regions but there are signs of selective allocation, including continued demand for global emerging market equities.
“Meanwhile, ISA season has begun on a stronger footing than last year, with £1.4 billion invested in March, the most robust start since 2021. This underlines the importance of tax-efficient investing as a consistent driver of flows, even during periods of heightened uncertainty.
“Looking ahead, investors will continue to monitor geopolitical developments and their impact on the macroeconomic environment. While short-term volatility has led to more cautious positioning, this month’s data suggests that many investors are holding strong and remain committed to their long-term plans, reinforcing the importance of diversification and a disciplined approach to investing.”
