Investments: Too early to tell if confidence is returning

Asset management firms saw a two per cent rise in UK domiciled investment funds at the end of February, but it is still too early to say confidence is returning to the markets.

Figures from the Investment Management Association show UK funds under management stood at £441.3 billion – a rise of two per cent. However, they were still below 0.6 per cent below the level recorded in February 2007.

Net sales of UK domiciled investment fund ISAs were positive at £31.7 million in February, compared with January's outflow of £68.4 million. But again this was down on the £88.1 million inflow seen in February 2007.

Jane Lowe, director of markets at IMA, said: "This month sees positive sales figures for both overall net retail sales and ISAs.

"Although it is too early to tell, these modest figures may indicate that consumers' investment in funds has settled down, following the asset switching taking place over the last few months.

"Only time will tell if long-term confidence has returned."

However, Rebecca O'Keeffe fund supermarket Interactive Investor, stated the low sales volumes were evidence of consumer fear and a worrying short-term approach to the investment market.

"The latest IMA statistics confirm that year-on-year net sales are approximately a third of last year's sales. Whilst at least February demonstrated a positive inflow of funds against the outflows experienced in January, it does demonstrate that investors are still very wary of investing in the market at the moment," she said.

"These are difficult market conditions, but for those investors still unsure about contributing to using an ISA or Pension this year, they should remember that this year's allowances, and associated tax benefits, can never be regained."

She added: "With the tax deadline fast approaching investors should make sure the investments they hold are used in the most tax efficient way possible. Under the tax rules you can sell £7,000 worth of unit trusts or shares and buy them back within an ISA wrapper. Alternatively, if you have used up your ISA allowance, you can buy them back within a Pension. This allows investors to gradually make all their investments tax efficient – which is the optimum way to invest."

Within ISA sales, the IMA figures show, the most popular sector – outside fund supermarkets – was UK All Companies with £79.1 million gross sales. In net terms, the Cautious Managed sector was ahead of the field – for obvious reasons amid the current volatility.

The biggest-selling sector for UK funds was the Specialist sector with inflows of £276 million, of which £119 million was commodity funds.

Property meanwhile saw outflows of £7 million, following outflows of £77.3 million in January.

However, greatest net outflows were record for the UK All Companies sector at £222.9 million.