Investment industry suffers worst month on record

27 February 2008 / by Rachael Stiles
The investment industry suffered its worst month on record in January, with private investors withdrawing £550 million from unit trusts, and the largest ever outflow from ISAs.

In January, funds under management of UK domiciled investment funds stood at £433.2 billion – seven per cent lower than December and a three per cent drop from January 2007. Overseas funds also got hit, falling to £16.3 billion in January, a nine per cent drop when compared to the previous month.

According to the Investment Management Association (IMA) which released investment fund statistics this week, the ISA industry fell sharply in January, seeing withdrawals of £68.4 million compared to deposits of £17.0 million in December and £30.9 in January 2007. UK domiciled ISA funds under management were at £50.2 billion, which shows an eight per cent fall from December and a two per cent reduction on January 2007's figures.

As the tax year draws to a close and people rush to take advantage of the tax-free savings on offer, Richard Saunders, Chief Executive of the IMA, expects this year's ISA season to be a slow one for stocks and shares, exacerbated by broader market conditions, but National Savings and Investments(NS& I) and the building societies have both reported strong inflows of cash into deposit accounts and other cash-based products.

Mr Saunders said that while January is traditionally a slower month, it saw "a continuation of the outflows experienced in the last two months of 2007. January's outflows were concentrated in equity funds, with property fund outflows down to about half the levels of November and December."

A combination of rough seas in the financial markets, plummets in the property market, concerns about a possible recession, and uncertainty about the future of Northern Rock have all shaken investors' confidence, which accounts largely for the investment industry's current woes.

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