The UK Investment Association’s latest figures show that sales in February were £845m ($1.26bn, €1.15bn) compared to £1.8bn in February 2014, although the sales represent a significant increase on the £320m recorded in January.
Total funds under management rose to £872bn in February from £783bn in February 2014.
Meanwhile, property funds recorded the highest sales of any asset class at £304m, while mixed asset funds saw sales of £137m, and fixed income funds sold £130m. The worst selling sector in February was UK All companies, which recorded outflows of £612m.
Global equity funds saw the highest net retail sales of all equity regions at £403m, followed by European equity funds with £266m. Meanwhile, North America saw outflows of £356m, its biggest on record, while the UK recorded outflows of £530m, its highest outflows since January 2008.
Daniel Godfrey, chief executive at the Investment Association, said: “Although net retail sales in February were up from the levels we saw in January, they are still considerably lower year-on-year.
“Property funds saw the greatest inflow whilst equity funds, which sold so well last year, saw a small net retail outflow for the second month running.
“Investors reduced their holding of UK and North American equity funds in February in favour of Global, European, and Japanese equity funds.”
Election worries
Jason Hollands, managing director, business development & communications at Tilney Bestinvest, said February’s figures cement the last 12 months as the best year ever for inflows into property funds.
However he added that the data suggests that retail investors who did continue to invest despite a significant drop in fund buying ditched UK and US equities.
“In our view, these are clear signs that investors are skittish on equity market valuations, a factor that may be further exacerbated by recent headlines around the FTSE 100 passing 7,000 points for the first time, even though this is a poor gauge of actual valuations which in price/earnings terms remain far below the levels since during the dot-com bubble.”
He added that cautious sentiment towards the UK equity market is likely driven by the uncertain outcome of May’s general election, despite the reasonably solid outlook for UK GDP growth.
“Whatever the near-term uncertainties, it is important that retail investors don’t get blown off course from their long-term plans,” he said. “In particular, with ever more of the UK public having been drawn into the higher rates of tax in recent years, it makes sense to utilise tax efficient ISA and pension allowances.
“For those who are unsure about whether to invest now, a sensible step is to fund their ISA allowance with cash by the end of the tax year deadline and then to invest later on when they feel more comfortable about doing so, or better still taking timing out of the equation by drip feeding their cash into the markets over a period of months.”
The Investment Association represents UK investment managers and has over 200 members managing more than £5trn for clients around the world.
