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Investment in equities remains strong

13 May 2009 / by Rachael Stiles
Despite market turmoil, and diversification of investment funds over recent years, investors are still committed to equities, the Investment Management Association (IMA) has found.

Investors have retained faith in equities over the long-term, according to market analysis from the IMA, investing £30billion since 2001.

The majority of gross retail sales are for equities, accounting for 56 per cent in 2008 even in the current climate, which, despite being the lowest level on record, is still more than half, the IMA said.

However, retail investors' are changing the way they invest, with a larger proportion of money going into other types of funds. In the three years up to the credit crunch, bonds, property, and other funds have accounted for 75 per cent of net retail investment, whereas in the second half of the 1990s, more than half was going into equity funds.

History shows that funds have also remained strong throughout previous recessions, becoming increasingly popular towards the end of the last two, and comparisons with the rest of Europe reveal that in the UK, investors' attitudes towards equities remains relatively resistant to the current recession.

For example, in the rest of Europe, net outflows from equity funds during 2008 represented 6.6 per cent of funds under management, compared to just 1.0 per cent in the UK.

"The research confirms that UK investors continue to give a strong weighting to equities in their fund portfolios, albeit with greater diversification compared to previous years," said Chris Bryant, head of statistics policy at the IMA. "But the fact that investors have put a smaller proportion of net investment into equity funds in recent years could be viewed as a sensible move towards a more diversified portfolio.

"UK investors seem to see equities as a long term investment - this was shown last year when investors largely held their nerve, making much smaller net withdrawals from equity funds than other Europeans."

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