Net sales of investment funds to retail investors fell to £1.6bn last month, almost half of the £3bn seen in April 2014, according to figures from The Investment Association published today.

Funds sales into ISAs, however, were up slightly to £1.4bn from £1.2bn in April last year.

“This overall weakness is likely to reflect a combination of factors including nervousness over the outcome of the UK general election given the polls were indicating no overall winner, as well as concerns over global growth stalling and the risk of a Greek exit from the eurozone,” said Jason Hollands, managing director of Tilney Bestinvest.

“The relatively robust ISA sales figures in our view likely reflect the enlarged size of the ISA allowance compared to the same month last year (the ISA allowance was hiked in July 2014) allowing regular, more affluent early-bird investors to fund a greater amount, and potentially some investors choosing to shift existing assets into tax-free ISA allowances ahead of a change in government that might have heralded in increased taxes.”

Of those who did invest during April, income generating asset classes remained popular. Fixed income funds saw net retail sales of £329m, the highest since October 2012.

A sure sign of growing cautiousness however, was the £529m ploughed into targeted absolute return funds during the month, the highest level on record.

“With risk assets having been inflated by years of stimulus and very accommodative monetary policy, there is a growing nervousness that markets could be set for a correction. Funds which aim to deliver absolute returns across different market environments are therefore seen as increasingly appealing – though it remains to be seen how they would cope during a period when both equities and bonds experience a synchronised sell-off, for example in the event of a liquidity squeeze,” said Hollands.

“Our favoured targeted absolute return funds include Invesco Perpetual Global Targeted Returns, Insight Absolute Insight, Morgan Stanley Global Diversified Alpha and the Standard Life Global Absolute Return fund.”

[article_related_posts]