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Special effects

If you had read the headlines about the investment fund industry’s sales for December, you would be forgiven for thinking that everything was doom and gloom and that investors were selling up hand over fist. Not so.

Alongside the figures for December, we published the annual 2007 numbers. Taking the year as a whole, we saw net sales of almost 9.5bn. Of course, this was not as good as the 15bn in 2006 but it outstripped, often significantly, each of the preceding years going right back to 2000.

If we had not seen the unusual outflows of the last two months of the year, we could well have been looking at sales of over 11bn last year. Of course, we cannot ignore the events of the last few months of the year, more about which later.

Funds being managed on behalf of retail investors continued to rise and, despite the market turmoil of 2007, reached 468bn, a 14 per cent increase on December 2006.

As would be expected, equities continued to play a dominant role although the latter half of the year saw a slight drop-off from the rally of 2006, with money market and balanced funds coming out as net winners. Bonds took a big hit after dropp-ing from 3.6bn net sales in 2006 to only 167m last year. Overall, the best-selling sectors for 2007 were specialist, as a result of the boom in property sales, cautious managed and equity income.

Of course the big story of 2007 was property funds, which kept the specialist sector as the best-selling sector for nine of the first 10 months of the year.

They reached their peak in the first quarter and were followed by a solid second quarter.

Sales then slowed down in July and the credit crunch put paid to their popularity, with investors becoming net sellers in the last two months of the year and cautious managed funds leaping in popularity, perhaps reflecting advisers’ and investors’ nervousness in the markets as they re-evaluated their portfolios.

Last year also saw the first time we began to publish figures for overseas domiciled funds sold to UK investors. Our current data set comprises 620 funds from 24 companies and amounts to 18bn in funds under management. While we do not have enough of a history yet to come to any conclusions, it is clear that UK investors have a growing appetite for overseas funds and that this is an area which looks set to grow in the future.

All in all, 2007 was a good year, with the credit crunch responsible for upsetting what was set to be a very good year. The big question, of course, is where is the industry going to go from here? With markets still unsettled and property funds losing their attraction, the future is clearly uncertain.

Whether or not investors will hold their nerves and bide by the mantra that investing is a long-term game remains to be seen.

Mona Patel is head of communications at the IMA

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