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Late exodus spoiled year for funds

December saw one of the biggest-ever recorded outflows from retail funds, according to the Investment Management Association.

IMA statistics for the year-end show that outflows in November hit £332m but were even worse in December at £377m, with a £242m net withdrawal from property funds.

However, the IMA says that with the exception of the final two months, 2007 was a good year for fund business, with assets under management growing to £468bn in December from £410bn in December 2006.

Chief executive Richard Saunders says: “Right up until October, funds were selling at a steady £1bn a month and then the turn-round came in November. Managed funds fared well throughout the year.”

In terms of retail business by asset class, one notable change has been the growing unpopularity of bonds since being the biggest asset class in 2003.

The UK corporate bond sector was the worst-selling sector for 2007, with more than £1bn in outflows over the year. Europe ex UK and UK smaller companies completed the bottom three.

Despite a drop in popularity in the latter half of the year, sales of £2.1bn in property funds helped to boost the specialist sector to become the top-selling retail sector for the second year running. Rounding off the top three sectors were cautious managed and UK equity income.

Intermediaries are the overwhelming dominant distribution channel for fund sales but Saunders notes that these figures are not the complete story.

The statistics show that intermediaries were responsible for 85 per cent of sales in 2007 but this does not properly take into account sales by supermarkets or platforms, which the IMA is looking to address this year.

It only has rough Isa figures from the platforms which show that a 43 per cent share of Isa and Pep sales over last year.

Saunders says there are fewer new buyers coming into Isas than are leaving. Unwrapped sales or sales through other wrappers, such as investment bonds and self-invested personal pensions, are making up an increasing portion of sales.

He says: “What is behind this drop? I think one reason is that retail investors have not really returned to the market from the downturn seen at the start of the century. Isa sales are a good indicator for retail confidence and their failure to take off shows that the retail investor has not really returned.”

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