Net retail outflows fell from £1.8bn in August to £505m in September, bringing total outflows in the third quarter of 2025 to £2.7bn, data from the Investment Association (IA) has shown.

The IA said the fall in outflows in September was supported by stronger sales to fixed income funds, which saw their highest inflows since May with £818m, and mixed asset funds, which reached £264m.

However, investor caution towards equities continued in September, with outflows increasing from £2bn to £2.6bn.

Europe was the only region with positive equity flows, with inflows of £124m during the month.

UK equity outflows improved slightly in September, falling from £849m to £795m, while the country saw equity outflows of £2.3bn in Q3 overall, broadly in line with Q2 but an improvement on the £4.1bn of outflows in Q1.

Money market funds saw inflows of £524m, and the IA said that the shift in flows from equity funds into money market funds suggested that investors were expecting market volatility amid speculation about a US market correction and AI bubble.

Index tracker funds recovered from their largest-ever monthly outflow in August (£399m) to reach inflows of £1.2bn in September.

“September’s data show caution over equity funds prevailing among investors, with outflows of £505m,” commented IA director, market insight & fund sectors, Miranda Seath.

“While still negative, this is a marked improvement on September 2024 in the run up to last year’s Autumn Budget, when outflows reached £3.8bn amid speculation around potential capital gains tax hikes. We will look to see how investor sentiment develops in October.

“With a later Budget this year and rising speculation over pension tax changes, we hope that investors wait to see rather than making irreversible moves to take out tax-free lump sums from pensions.

“Investor behaviour in September suggests patience rather than pessimism as they wait for greater clarity before making their next move.

“More broadly, our latest poll of UK adults shows that a perception that investing is risky remains the biggest barrier to investing for UK adults, underlining the need to transform how risk is communicated.

“Our work to support a re-framing of risk warnings as part of the Leeds Reforms will help potential investors better understand the risks and rewards of investing. Longer term, supporting an investment culture and consumer confidence will help to boost participation and strengthen long-term financial resilience for households and the economy.’’

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