Investment funds under management increases

Investment funds under management of £410 billion in December saw a 3% increase from November and were 18% higher than December 2005, according to the Investment Management Association (IMA). ISA funds under management of £51 billion, rose 2% from the previous month, and were 15% higher than the previous year.

ISA sales
Net ISA sales of £107 million in December were significantly higher than the £3.1 million outflow in November, but were down 16% from December 2005. The most popular ISA sector in December was UK All Companies, accounting for 26% of gross ISA sales.

Net sales by asset class
Total net sales in December were £1.9 billion with equities accounting for inflows of £909 million. Net retail sales of £1.7 billion were almost three times higher than those seen in November, with £983 million invested in equities, followed by £432 million in bonds.

2006 Summary
2006 saw investors returning to investment funds at levels not seen since the record year of 2000. This coupled with a year on year stock market increase of 11% in the UK alone, saw funds under management of investment funds reach record highs of £410 billion. ISA funds under management also reached record levels after breaching the £50 billion mark in October.

Institutional sales
Net sales of £5.3 billion saw institutional inflows reach the highest levels on record beating the previous peak in 1998 by 36%. Net institutional sales in 2006 represented 26% of total net inflows into unit trusts and OEICs. For the fifth consecutive year the most popular net institutional asset class was bonds, representing 43% of net inflows.

Retail sales
Net retail sales of £15 billion in 2006 were the highest in 6 years and were at the second highest level on record, just 13% behind the peak year of 2000. Year on year this was an increase of 80%.

The most popular asset class in 2006 was equities, which accounted for net retail inflows of £8.1 billion, followed by £3.6 billion in bonds.

The most popular net retail sector in 2006 was the Specialist sector with sales of £4.4 billion, almost double the second best selling sector, UK Equity Income, which had net retail sales of £2.3 billion. Property funds accounted for the strong growth of the Specialist sector in 2006 with net retail sales of £3.6 billion representing more than 80% of inflows into the Specialist sector.

Intermediaries continued to dominate the distribution of funds throughout 2006 with 79% of gross retail sales being intermediated. The proportion of gross retail sales through sales force/tied agents, however, fell to their lowest levels with the channel representing only 8% of gross retail business.

ISA sales
Net ISA sales saw a recovery last year following their all time low in 2005, with 2006 sales topping £2.5 billion, the highest for three years. In net terms, the most popular ISA sector was the unclassified sector with sales of £527 million, closely followed by inflows of £517 million into the Cautious Managed sector.

For the first time, fund supermarkets became the dominant distributor of ISAs representing 38% of gross ISA business in 2006, followed by 33% through sales force/tied agents.

Richard Saunders, Chief Executive of the IMA commented: "2006 was a good year for the investment funds industry with funds under management breaching the £400 billion mark for the first time in December and net retail inflows the second highest ever. But perhaps the single most significant development was the confirmation that the face of retail distribution is seeing real change, with fund supermarkets now dominating ISA business.

"The industry enters the new year in good shape, and ready to play its part in building a retail savings industry for the 21st century."