Investors take record amount out of funds

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Retail investors withdrew a record amount from UK funds at the end of last year as sub-prime troubles and the market turmoil hitconfidence.

Net retail outflows of investment funds surged to £377m in December 2007, up from £332m the month before. A year ago, in Dec-ember 2006, net sales were running at £1.7bn, according to the Investment Management Association. For the year as a whole, net retail sales fell to £9.5bn from £15.3bn in 2006.

"In November and Dec-ember, as the impact of the credit crunch began to be felt, investors significantly re-evaluated their portfolios and the industry experienced its first overall retail outflows in 15 years," Richard Saunders, the chief executive of the IMA, said yesterday.

Sales of individual savings accounts in December, however, came in at £17m, reversing the withdrawals seen in the previous two months. However, the monthly figures were still sharply down from the £106.6m net sales seen in December 2006, and on an annual basis ISA sales fell by £600m to £1.7bn.

Peter Hicks, the head of IFA Channel at Fidelity International, said individual investors were now delaying taking action until the markets settled. "Since the run on Northern Rock in September last year, we have seen a clear change in investor sentiment," he said. "Many savers are now choosing to sit on their hands rather than commit fresh money to the market. But we have seen no rush for the exits following the latest bout of volatility. Too many investors are tempted to redeem when prices fall, but this action simply turns a paper loss into a real loss. It is better to ride out the storms."

The IMA's figures showed that "cautious managed" funds were the most pop-ular sector last month, accounting for sales of £129.8m. However, investors moved out of the "UK All Companies" sector, which saw net outflows of £260m in December. The sector, nevertheless, accounted for a quarter of ISA sales last month.

Property funds, meanwhile, saw net outflows by both retail and institutional investors rise to £537m in December, compared with £494m in November.

In recent weeks, some commercial property funds have restricted withdrawals.