March registers £1.36bn inflows despite market volatility

Net retail sales recorded inflows of £1.36bn in March, marking a fifth consecutive month of inflows, new data published by the Investment Association (IA) has revealed.

The rise in March did represent a slower pace than February’s £2.52bn, however.

According to the latest figures, 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.

The IA reported that investors favoured cash-like assets and diversified strategies, with record inflows into money market funds at £2.01bn, and continued demand for mixed assets (£1.08bn). Equity outflows accelerated to -£1.32bn, while bonds returned to outflows of -£0.97 billion.

Flows proved “relatively resilient”, the trade association stated, despite heightened geopolitical tensions including the conflict in the Middle East. The IA suggested this was particularly pronounced when compared with the response to Russia’s invasion of Ukraine in 2022, when £2.5bn and £3.5bn were withdrawn from funds in February and March, respectively, amid broader macroeconomic pressures four years ago.

Director, market insight and fund sectors at the IA, Miranda Seath, commented: “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.”

The association also stated that the ISA season provided support to flows in March, with £1.4bn invested in March marking the strongest start to the season since 2021 as investors made use of annual tax allowances. By contrast, March 2025 saw inflows of £929m.

Seath added that the ISA season had “begun on a stronger footing than last year”.

“This underlines the importance of tax-efficient investing as a consistent driver of flows, even during periods of heightened uncertainty,” she continued.

“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.”

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