UK Investors Shun The Stock Market
Private investors appear to be losing confidence in the stock market as millions of pounds are withdrawn from UK investment funds.
When you think of the stock market, do you see a sinking ship?
Well, you wouldn't be the only one as private investors withdraw record amounts from UK investment funds. Over the past three months, investors have given these funds a definitive thumbs down with money flowing out at a faster pace than new investment coming into the market.
New figures from the Investment Management Association (IMA) show UK investors pulled out a whopping £550.5 million more than they invested in investment funds in January. Share-based funds saw the worst outflows of £867 million. This includes £77 million withdrawn from property funds which have suffered a pretty bad run lately.
Hardly surprisingly, the most popular asset of the month was bonds which saw inflows of £184 million as investors retreated into seemingly lower risk fixed-interest funds.
January's figures continue the negative trend of the previous two months. Indeed, fund sales in November 2007 saw investors withdraw a net total of £332 million while in December UK funds lost another £377 million. Take a look at the deteriorating results below:
By Month Net Retail Sales £m Net ISA Sales £m
January 2007
+£912.0
+£30.9
December 2007
-£377.3
+£17.0
January 2008
-£550.5
-£68.4
Source: Investment Management Association. Retail sales refer to those made by individual investors.
Sales figures for the last three months look particularly dismal when they're put in context with progress made this time last year. Indeed, investment funds took in a staggering £912 million in January 2007 alone. The picture is similar for investments in ISA funds which gained almost £31 million 12 months ago, but lost over £68 million as hordes of investors jumped ship last month.
And funds under management - which represents the combined value of all UK investment funds - are sinking too with more than £4 billion wiped off the total last month. Although UK investment funds buy assets in all four corners of the globe, it appears investors have lost faith in their home market most of all with the UK All Companies sector posting the heaviest losses in January, nearing £439 million.
Looking back further the results become even more striking. In fact, even if you go as far back as 1999 the IMA's figures have never shown such large withdrawals from UK funds as they do now. And that includes difficult investment periods during the technology boom and subsequent bust in 2000 and the bear market which lasted until 2003.
So why have investors lost so much confidence this time? Well, of course, choppy stock markets never help, but once again it would seem we have to leave at least some of the blame at the door of the credit crunch. Since nobody really knows just how bad things could get and with the threat of a recession still looming in the background, it seems shares are becoming an increasingly unpopular place for UK investors to be.
True, January is traditionally a slow month for investment funds in the run up to the ISA season, but even that can't really account for the worst sales results of the century. I expect next month's results will tell a similar story.
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