British saving more in the recession, fund industry figures for 2009 show

News - Funds

Written by Ray Clancy

Thursday, 04 February 2010 10:27

Assets under management in the British fund industry hit a record high in 2009 thanks to a spike in sales to investors saving more during the recession, according to the Investment Management Association.
Net sales of funds to retail investors jumped 45% over the year to £25.8 billion, pushing total funds under management up by a third to an all time high of £480.8 billion.

Richard Saunders, chief executive of the IMA, said the rapid recovery of funds reflected higher savings rates by British households during the recession and the relatively poor returns from other assets such as cash.

‘There’s quite a well known phenomenon that people’s reaction to economic recession is to put money away,’ he explained. Saunders highlighted sales of individual savings accounts (ISAs), tax free investment products, which have had their best year since 2001. ‘ISAs are a bellwether for what the man on the street is doing with his savings,’ he said.

The figures show a continued long term shift in British investors’ preferred asset classes.
Equities comprise the majority of funds under management at 61% of the total, though this has fallen from 83% in the 10 years since the end of 1999.

Bonds now comprise 20% of funds, up from 8% in 1999, and continue to increase their share, ranking as the best selling asset class in 2008 and 2009. Sales of equities recovered to second place in 2009 from sixth a year earlier.

Property comprises 2% of funds under management, a tenfold increase on 1999 when the figure was just 0.2%.

‘2009 has seen investors adding to their savings at record rates. This trend can be traced back to the autumn of 2008 in the immediate aftermath of the Lehman crash and the ensuing market falls,’ said Saunders.

‘Investors have prudently chosen wide diversification both across asset classes and geographically, in marked contrast to the previous record year of 2000. And it is good to see people once more investing via ISAs, after five years in which ISAs saw higher levels of withdrawals than investments,’ he added.

The figures also show that Absolute Return was the top selling IMA Sector in December 2009, with net retail sales of £511.0 million, just beating Property with £510.9 million, which had been the top sector for the two previous months.

The Sterling Corporate Bond was the moswt popular IMA Sector during 2009 as a whole, topping the sales chart for eight months of the year from January to August, with total net retail sales of £6.0 billion for the year. Nearly £1 in every £4 invested in funds during 2009, 23%, went into a fund in the IMA Sterling Corporate Bond Sector.

Abosolute Return was the second most popular IMA sector for the whole of 2009 and was the most popular in both September and December. Total net retail sales for the year were £2.5 billion, accounting for around £1 in every £10 invested in funds in the year.

Property came fourth overall for the year and accounted for £1 in every£16 investend in funds in 2009 with £1.6 billion in net retail sales. It came top in both October and November 2009, and was only narrowly beaten to the top slot by Absolute Return in December. This is a dramatic reversal of the position in 2008, when Property came in at 33, with a net outflow of funds of £466 million.

Overseas domiciled funds sold to UK investors in 2009 totalled £1.6 billion net retail, in contrast to the outflow of £663 million in 2008.