Investment hit by most awful month

by Dave Nixon

Story link: Investment hit by most awful month

Private investors extracted £550m ($1.08bn) from unit trusts and funds in January, making it the investment industry’s worst month on record.

The “Isa season”, where private investors have conventionally invested in tax-efficient individual savings accounts ahead of the tax-year’s end, also had a meager start, according to the Investment Management Association.

The industry said it suffered its biggest ever outflows from Isas last month. This is in sharp distinction to building societies and the government-backed National Savings & Investments, which have reported strong inflows of money into deposit accounts and other cash-based products.

The most recent withdrawals follow two months of net redemptions by retail investors from investment funds, which made the fourth quarter of 2007 into the industry’s worst on record.

About £68m was withdrawn from Isas in January compared with inflows of £17m in December and £30.9m a year ago.

This month, Peter Hargreaves, chief executive of Hargreaves Lansdown, the independent financial adviser, said he had small hope for this year’s Isa season, when investors normally sprint to invest their £7,000 allowance before April.

Fund management groups have furthermore forecast poor Isa sales over the next three months as investors postpone investing until markets stabilise and the economic outlook becomes more confident.

Investors’ assurance in shares has been hit by an amalgamation of tumbling financial markets, sharp falls in property prices, worries about recession and the Northern Rock crisis.

Net outflows from property funds slowed to £77m last month, having hit £242m in December and £253m in November. Nevertheless, fewer investors turned to more vigilant funds balanced between equities and bonds in January. In November and December inflows into more cautious funds offset some of the redemptions from equity funds.

Net outflows from equity funds continued generally steady at £867m last month, against £854m in December. But sales of units in balanced funds slowed to £85m from net inflows of £154m in December. Sales of bond funds also slowed somewhat from £184m in December to £151m.