Britons Saving For Rainy Day?
Wednesday, June 09, 2010

Funds under management in UK funds reached a record GBP510.9bn (USD736.5bn) in April, with new data suggesting that investors are taking a more cautious approach in their choice of savings and investment vehicles.

According to the Investment Management Association (IMA), April 2010 saw net retail sales of GBP2.3bn - the highest of any month this year, and the highest month since November 2009 - while net sales of tax-advantaged Individual Savings Accounts (ISAs) totalled GBP1.2bn, the highest month since April 2001 and 63% higher than in April 2009. 

April, which marks the end of the tax year, is traditionally a strong month for ISA sales as investors rush to take advantage of their tax-free savings allowance, which this year has risen to GBP10,200 for all investors. But the scale of the surge is somewhat more surprising, and the figures show that savers and investors are looking increasingly at safer fund vehicles.

"April had the highest net retail sales so far this year - and funds under management once again reached record levels," observed Richard Saunders, Chief Executive of the IMA. "For the previous 12 months, fund sales have averaged over GBP2bn a month and during this time total funds under management have increased by 36%."

This high and stable level of sales is in sharp contrast to 2008, when four months saw outflows and the average retail sales for the year as a whole was less than a sixth of the current level, at just GBP318m a month. 

Bonds were once again the top selling asset class in April 2010, with GBP629m of net retail sales, 29% lower than in March. 

Equity sales, although more than double the level in March, were the second lowest they've been in the last 12 months.

Overall, the spread of sales between the four major asset classes is relatively even, showing that investors are going for a diversified approach. Cautious Managed was the best selling of the sectors monitored by the IMA in April, with net retail sales of GBP407m, the first time it's topped the tables since November 2007. Strategic Bond was the second most popular, after being the most popular sector for the two previous months.

However, there were no Equity sectors in the top 5, with the highest selling Equity sector being North America, in sixth position. 

Institutional funds saw net sales of GBP1.13bn in April 2010, a strong contrast to the outflow of GBP525m experienced in March.

Overseas domiciled funds saw net retail sales of GBP211m in April, up from GBP171m in April 2009.

Recent figures from the UK's Building Societies Association (BSA) confirm that Britons currently have a higher propensity to save, reflecting subdued demand for borrowing and risky investments.

Balances held in savings accounts at mutual institutions increased by GBP929m in April compared to an increase of GBP534m in March.

“Mutuals have been able to attract savers by offering competitive rates, especially on popular ISA products," said Adrian Coles, BSA Director-General.

"Lending activity in April was relatively subdued compared to March, and given the continuing uncertainty regarding unemployment, possible tax rises, the future path of house prices and the availability of mortgage funds, lending figures are likely to remain at a similar level in coming months," Coles added.