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Vote of confidence

While it is too early to say whether or not the markets are on their way up in the long term, there is some good news for the fund industry.

Net retail sales of open-ended funds have had a strong showing in 2009 so far. Continuing a trend of investors switching away from equities in light of the credit crunch, inflows into bond funds exceeded £1bn for the fifth consecutive month and April experienced the highest Isa sales in three years. Equity funds also saw modest retail inflows over the last two months.

The initial findings of an Investment Management Association poll of retail investors, conducted by YouGov in early May, show investor confidence has turned positive, with a 35-point swing.

The IMA GB investor confidence index reached 106 in May 2009 (on a scale of 0-200, 100 being neutral) whereas six months ago overall confidence was negative at 71. The IMA GB investor intentions index in May 2009 was 99 (on a scale of 0-200, 100 being neutral). This is up 10 points since November 2008 and shows investors on the whole are becoming less negative about putting money into new investments.

More than 50 per cent said they think now is a good time to put money into investment products, with equities being the most popular option. However, whether or not they will act on this remains to be seen. And investors are still cautious about the residential property market, with half thinking it will continue to fall for at least 12 months before showing signs of recovery.

In terms of economic recovery, 47 per cent thought the economic slowdown would last 12-24 months, compared with November when 58 per cent thought it would take 12-24 months to recover. On markets specifically, 53 per cent of investors think it will take more than two years for the FTSE 100 to return to 6,000.

Polls like this should always be viewed with caution as offering just a snapshot of investor views at one point in time. Taking a longer-term view, research published by IMA last month shows UK investors still give a strong weighting to equities over the long term, despite the trend towards increased diversification of holdings over the past few years.

What is also telling is that UK investors have a resilient approach to equity funds. They largely held their nerve last year, making much smaller net withdrawals from equity funds compared with investors in other European countries.

Again, only time will tell what will happen but current investor attitudes, coupled with their long-term behaviour, suggests equity investing may pick up in the long-term.

Mona Patel is head of communications at the Investment Management Association


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