Retail investors shun Isas amid market downturn

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The Independent Online

Sales of investments such as unit trusts and individual savings accounts (Isas) slumped by 60 per cent in July compared to the same time last year amid continuing stock market gloom, according to industry figures released yesterday.

Figures from the Association of Unit Trusts and Investment Funds (Autif), reflect a deepening period of downturn for retail investments, which were already significantly below last year's levels.

Investment houses achieved new sales of £505m in July, down from £1.2bn last year, Autif said. Isas, which account for most new retail investments in the stock market, fell by 30 per cent in net sales to £438m.

Gross sales were also down but only by 16 per cent, reflecting a trend among investors who did not want to hold their investment any more to sell them back to the fund management company.

Anne McMeehan, an Autif spokeswoman, said: "It is partly that people have other things on their mind in the summer than buying Isas. But there has also been a general malaise in the equity markets, which has been a disincentive to retail investors."

Investment companies have already suffered a 41 per cent fall in new Isa business in the first quarter of this year compared to the first three months of 2000 – the period when most contracts are usually sold.

Ms McMeehan said: "It is too soon to suggest that there is a comparison between now and the effect on investments of the crash in the late eighties."

The individuals most put off by the fall in equity prices appear to have been first-time investors, who have historically taken out Isas or similar products when their prices have already been at levels which were close to the top of the market. In contrast, more experienced private investors have ploughed their money into shares when prices have slumped.

This trend has been borne out by the record of New Star, the investment house which last month achieved one of the highest ever fund raisings from two funds aimed at more seasoned private investors. The fund raising, worth £243.5m, also accounted for nearly 50 per cent of the total net sales achieved across the industry in July.