Private investors head for the exit

Private investors' confidence has plummeted to such low levels that November was the worst month on record for redemptions of holdings in investment funds.

The Investment Management Association said yesterday that taking into account both new investments and redemptions, investors withdrew 333m from unit trusts and Oeics during November. The worst-hit funds were those invested in equities, which suffered a net outflow of more than 600m.

The IMA's statistics also provided further evidence of a panic in the commercial property sector, where several fund managers have been forced to impose restrictions or penalties on withdrawals to avert the possibility of firesales of assets. Yesterday, the IMA said investors had pulled more than 250m out of such funds last month alone.

Richard Saunders, chief executive of the IMA, said investors' confidence in almost all financial assets had been rocked by the global credit crunch, gloomy economic news and a downturn in the housing market.

"November saw record retail outflows, with investors redeeming holdings in property, equities and bonds," Mr Saunders said. "The negative trend was also evident in sales of non-UK funds and individual savings accounts [ISAs]."

The collapse in investment in unit trusts and Oeics in recent months has left the savings industry facing a 30 per cent shortfall on investments for 2007 compared to the contributions made in 2006. In November last year, for example, investors put just over 600m of new money into funds, compared to this month's net outflow of 333m.

While the downturn in investment is chiefly a result of plunging consumer confidence, the savings industry has repeatedly complained about the Government's attitude towards ISAs, where it says investment limits have not been raised in linewith inflation.