Apprehensive investors pull out of equities as bonds find favour

The Momentum UK Team 10 January 2012

Nervous investors withdrew a record £864million net from equity funds in November latest figures show.

The report released yesterday by the Investment Management Association (IMA) the trade association for the investment management industry in the UK showed the largest net equity outflow on record at £864million compared to average monthly outflow of £506million across the previous twelve months.

Equity funds have seen net outflows for four of the last five months, following over two years of net inflows.

Funds held in an ISA also saw a net outflow of £28million, the highest net outflow for almost three years. Year to date net ISA sales totalled at 3.2billion compared to 3.9billion for 2010.

Market volatility and the Eurozone crisis may have factored in pushing private investors into investing in safer options such as the bond market. For third month in a row bonds were the highest selling asset class with net retail sales of £443m compared to the monthly average of £332m across the previous twelve months.

Cautious investors seemed to favour government bonds, also know as gilts, which featured among the top selling sectors in 2011, with retail sales of £99million for November compared to a £35million monthly average across the previous year.

Richard Saunders, Chief Executive of the IMA, said in a statement:

"The second half of 2011 has seen a marked slowdown in fund sales from the exceptionally strong levels of the last three years, and there was no let-up in November, which saw the lowest monthly net sales since October 2008.

"Investors favoured bond funds in November, while sales of absolute return funds bounced back from previous low levels. Equity funds experienced significant outflows, mainly from UK, European and North American equity funds."

According to Saunders 2012 could see significant changes in the investment market:

"The future of the eurozone will continue to be a major concern for the investment management industry.

"Decisions in the coming weeks and months will have a real impact on the outlook for 2012, both in the UK and on the continent.

"Regulatory reform legislation will be making its way through Parliament, auto-enrolment and NEST will come on line, and preparations for the Retail Distribution Review will gather pace."