Continued growth of fund of fund sales

Funds under management at the end of quarter 4 2006 reached £29 billion, up from £27 billion at the end of the previous quarter and an increase of 24% from the same quarter in 2005, according to the Investment Management Association (IMA). Balanced managed funds accounted for the majority of funds under management, representing 68% of assets, followed by 18% in equities.

Funds of funds - net sales

Total net sales were £729 million in the fourth quarter of the year, with net retail sales representing £610 million, an increase of 8% on Q3 net retail inflows, but a fall of 6% on the same quarter in 2005. Net retail sales in 2006 reached their highest level with inflows of £2.9 billion.

75% of total net inflows into funds of funds in Q4 were invested externally, rather than in internal funds. The most popular sector in Q4 2006 was Cautious Managed, accounting for inflows of £317 million; this sector was also the most popular for the year as a whole representing sales of £1.2 billion.

Tracker funds

Funds under management in Q4 2006 reached £26 billion, an increase of 8% from Q3 and 20% from the £21 billion in Q4 2005. Retail sales saw a net outflow in Q4 2006 of £60 million, compared with outflows of £32 million in Q3 and £18 million in Q4 2005. The most popular distribution channel for gross retail tracker sales was the intermediary channel accounting for 42% of sales. The year as a whole saw an outflow of £239 million from index tracking funds.

Ethical funds

Ethical funds under management in Q4 2006 also saw an increase from the previous quarter and reached £4.9 billion, an increase of 24% on the same quarter in 2005. Net inflows for the year were £136.5 million, the highest since 2002.

Richard Saunders, Chief Executive of the IMA commented: "The final quarter of the year saw a consolidation of trends that have been apparent for some months now. There has been continued growth of fund of fund sales. And tracker and ethical fund sales have continued to be down on their levels of a few years ago, but with some signs of a recovery for ethical funds."