An exodus from equity and property funds led to the highest ever monthly net retail outflow in December, the latest IMA figures reveal.
After the first overall monthly outflow for 15 years in November, outflows continued to rise in December, reaching £377.4m.
Net retail sales in equities recorded an £844m outflow, of which £242m was in property funds. Balanced funds were the most popular asset class, with inflows of £154m.
ISA sales hit £17m in December, reversing the outflows in the previous two months, but down on the £106.6m in the corresponding month in 2006.
Despite the gloomy November and December figures, total net retail sales for the whole of 2007 reached the second highest figure since the peak in 2000. However, the £9.5bn retail sales recorded last year was significantly lower than the 2006 figure of £15.3bn.
The Specialist sector was the most popular for the year, accounting for £3.2bn, of which 2.2bn was in property funds. Cautious Managed recorded £2bn in sales.
ISA sales were just slightly higher than the all-time low in 2005, with £1.9bn last year. Fund supermarkets continued to be the most dominant ISA distributor, with 43% of gross business in 2007.
Funds under management reached £468bn at the end of 2007, 1% up on the previous month and 6% higher on December 2006.
"The first 10 months of 2007 saw a continuation of the strong performance of the previous year,” IMA chief executive Richard Saunders says.
"In November and December however, 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.
“The year as a whole was satisfactory for the industry, but the prospect is clearly more uncertain going in to 2008."
Fidelity International IFA Channel head Peter Hicks adds: “Too many investors are tempted to redeem when prices fall but this action simply turns a paper loss into a real loss. Our advice in such situations is: if you are an existing investor, do nothing. It's better to ride out the storms.”
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