Fund Sales Pick Up Over 2007
Investment in unit trust has gained momentum over the first half of the year, but there's still some way to go to beat sales in 2006.
The latest figures from the Investment Management Association (IMA) show that net retail sales of unit trusts and OEICS have stepped up in the second quarter of the year compared with quarter one. But with two-thirds of the year already behind us, retail sales for 2007 have some way to go if they are to exceed the total achieved in 2006 of more than £15 billion. The table below outlines the results:By QuarterTotal Net Sales £mNet Retail Sales £mQ1 2007-£1,428£3,026.9Q2 2007£3,406£3,658.9By Month August 2006£1,661£1,052July 2007-£1,844£973August 2007£989£744Source: Investment Management Association.Net retail sales rose by £632 million in the second quarter of 2007 relative to the first three months of the year. Total net sales - which takes account of both individual retail investors and institutional investors - were also positive in the second quarter, standing at over £3.4 billion improving dramatically on the position in the first quarter. Net retail sales fell to £744 million in August. Despite a flagging UK stock market following the collapse in the US subprime mortgage sector and the subsequent impact on global credit markets, retail unit trust investors appeared keener to move out of bonds funds, rather than UK share-based funds. Institutional buyers returned allowing net total sales to regain a positive total of £989 million. But figures for August still fell short of the position a year ago when total net sales exceeded the one billion mark by a considerable margin (£1.6 billion).The most popular sector amongst retail investors in August was UK All Companies which returned 11.2% over the last year. This is interesting since the Specialist sector has been flavour of the month for the previous nineteen in succession. The Specialist sector is a mixed bag of thematic funds which provide access to unique investment areas such as natural resources, biotechnology, emerging markets and commercial property. But despite the "exciting" investment opportunities on offer, retail investors are beginning to retreat to the more familiar UK stock market. More specifically, the sector failed to take the top spot in August owing to the many investors who ditched commercial property funds. Unquestionably, property has had a strong run in recent years, producing impressive double digit returns but as predictions for performance in 2007 are less optimistic, the popularity of these funds has noticeably waned. Meanwhile the sector falling out of favour with retail investors in August was UK Corporate Bond with growth for the last twelve months standing at a disappointing -2.5%. Rising interest rates have made it increasingly difficult for bond fund managers to produce positive capital returns leading investors to desert the sector. Cash can offer both a safe haven in terms of avoiding capital erosion and provide a decent yield with the base rate at 5.75%, so it's difficult to see a compelling case for corporate bond funds for the retail investor at present. Conversely, for institutional investors the most popular sector in August was UK Gilt despite producing a negative return of -1.4%. UK Gilt funds offer the safety of UK sovereign debt although in return for this greater security yields tend to be lower relative to other fixed interest assets. They're primarily intended for institutional investors, in particular pension funds, although there are funds available for retail investment. Pension funds have been using UK Gilts funds to narrow their deficits and re-balance their portfolios away from equities (shares) and corporate bonds. It's hard to predict what will happen to retail sales this year, but these figures suggest that the average UK private investor is still positive on shares even if he is slightly more nervous when compared to a year ago.More: So Where's This Stock Market Crash?