IMA EXAMINES RETAIL INVESTOR TRENDS

UK retail investors have spent the last decade diversifying their portfolios through a combination of non-equity assets and larger share of their equity investments outside of the UK and Europe than ever before.  New analysis by the Investment Management Association (IMA) highlights the changes in UK retail investors' savings habits and makes note of an interesting split in investor behaviour, as ISA investment trends prove significantly different to overall sales.

Commenting Jane Lowe, Director of Markets at IMA said:

"Investors are showing greater diversification in their portfolios with a move to a more balanced spread of assets. And while the majority of gross sales still go in to equities, we are seeing investors move towards larger weightings of equities outside of the UK and Europe compared to ten years ago. The analysis also highlights the difference between the net investments made by ISA investors and those made by other investors. Over the last two years, ISA investors have been opting for Protected and Cautious Managed funds, whereas non-ISA investment has largely been driven by £ Corporate Bond and Absolute Return funds.

It is welcome to see the record inflows for 2009 following the low levels recorded in 2008.  However, for 2008, the UK funds industry held up well compared to other European regions. This may indicate that advice, guidance and investor protection are central to consumers when investing and can provide a degree of stability in times of market stress."

The research compared data for January to October for the last three years and for 2000. Key findings include:

2009 set to be a record breaking year:

• Total net retail sales for 2009 so far have reached a record £21.1 billion. This is ahead of the total achieved in the whole of 2000 (£17.7 billion), which was the highest year for retail sales.
  
  
• Since November 2008, net retail sales have been consistent and exceptionally high. Since April 2009, net retail sales have been in excess of £2 billion each month.
  
  
• Net ISA sales for 2009 currently stand at £2.3 billion; this is the first inflow since 2003. However this is lower than 2000's figure of £7.2 billion over the same period.

Investors are diversifying more:

• Investors remain loyal to equities, with 49% of gross sales going in to Equity funds so far for 2009.  By contrast, in 2000 Equities comprised 79% of gross sales.  This year investors have put 29% into Bonds, compared to just 11% in 2000.
  
  
• ISA investors have also diversified their portfolios. For 2009, so far 40% has gone in to Equity funds, followed by "Other" ^**  funds (23%), which is largely represented by Protected funds. The remainder of gross ISA sales has gone in to Balanced funds (21%) and Bond funds (15%). In 2000, Equity funds represented 75% of gross sales, with Balanced and Bond funds making up most of the rest.

ISA investors are doing something different to overall findings:

• This year has seen the first net inflow into ISAs since 2003. In the intervening years ISAs (including former PEPs) have experienced net outflows in contrast with overall inflows to funds in the UK.

• The only asset group with consistent net inflows over the last three years is "Other" which is mostly due to Protected and Unclassified funds.  Equity and Bond funds have seen net outflows over the last three years.
  

• For non-ISA investors, the statistics highlight a choppy time for equities in the last three years.  In 2007 they were the most popular asset type, in 2008 the least popular and in 2009 they've come back from outflows to inflows; Bonds may have dominated for most of 2009, but over the last two months Equity funds have outsold Bonds.

• This recent turn-around in popularity for Equity funds is supported by the findings of the IMA's Great British Investor Savings Report published back in June of this year.  In the report respondents stated that if they were to invest in the coming 12 months then it would be in equities.

ISA investors are more consistent with their sector choices:

• Compared to overall sales, ISA investors have been consistent with their choice of investment. The IMA's Cautious Managed and Protected sectors have been in the top five net selling sectors over three years. The five worst selling IMA sectors have remained the same: UK All Companies, £ Corporate Bond, Europe Excluding UK, Balanced Managed and UK Equity Income.
  
  
• Overall net retail sales by sector do not show as many trends. £ Corporate Bond sector was the best selling sector for the whole of 2008 and is also so far for 2009. However, in 2007, it was the worst selling sector. IMA's Absolute Return sector has been the second top selling sector since 2008, when it was launched.
  
  
• It seems Europe has fallen out of favour with ISA and non-ISA investors, with both groups shunning the IMA Europe Excluding UK sector over the past three years.

A copy of the analysis can be viewed here.

-ENDS-

Notes to the editor:

IMA has briefed various IFA's and an Economist on the findings. If you would like further comment from them, please contact IMA's press office for their details.

About Investment Management Association
IMA is the trade body for the UK's £3 trillion asset management industry. The money its members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs. Its role is to represent the industry and promote high standards.

For further information, please contact:
Noreen Shah, Press Officer, IMA, 020 7831 0898
Ginny Broad, Head of Communications, IMA, 020 7831 0898 or 07834 089332