Isa sales double as confidence returns among private investors

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Sales of investment funds to private individuals hit six-year highs during the first quarter of 2006, as a three-year bull run in UK equity markets helped restore investor confidence.

Gross fund sales to private investors in March were up more than 40 per cent on the previous month, and some 82 per cent on the same period last year, at £6.24bn. Gross sales of Isas almost doubled compared with March 2005, reaching £1.11bn.

Although the number of investors cashing in their investments continued to rise in March, this was more than offset by the large volume of sales. As a result, net sales to private investors were more than four times greater than the same period last year, at £2.08bn.

UK equity funds were by far the most popular investment, accounting for almost one-third of the total sales. Specialist funds saw the second highest sales - boosted by investors looking for exposure to commodity markets and fast growing emerging markets such as China.

Richard Saunders, the chief executive of the Investment Management Association, the fund industry's trade body, said the numbers were proof that confidence had returned to the market: "In terms of net retail sales, March 2006 and the first quarter of this year were the best for six years. In addition, the Isa season was the strongest since 2002. This confirms that retail investors have continued to return to the market."

However, Mark Dampier, the head of research at Hargreaves Lansdown, the financial advisers, warned that although investor confidence was much improved, it was still fragile. "You've only got to go back three years, and people didn't want to touch equities. So it might not take much to knock the current confidence.

"I wouldn't be surprised if we see an element of profit-taking over the next couple of months. Those who have been invested for 18 months or more will probably have seen their money double, and in some cases treble, so they may want to realise some of those returns."

Fund sales to institutions also climbed sharply in March.