Investors rush to exit stock market savings

Nervous retail investors pulled record amounts from funds last month, confirming fears that the credit crunch and market jitters have taken their toll. Far more investors removed their capital than invested it, according to figures from the Investment Management Association yesterday.

Net retail outflows rose to £550m from £377.4m in December – the previous record. This compared to net retail inflows of £912m in January 2007. Funds domiciled in the UK were worth £443.2bn last month – a fall of about 7 per cent since December and 3 per cent lower than this time a year ago.

The UK All Companies sector was the hardest hit, with outflows of £439m, while Global Growth funds saw the largest inflow, of £154m. Overseas-managed funds recorded a 9 per cent drop from the previous month, although their assets of £16.3bn were slightly higher than the January 2007 figure of £14.1bn.

Equities saw the largest month-on-month haemorrhage – a total outflow of £867m, including £77m from property funds. Predictably, the most popular asset class was bonds, with an inflow of £184m as concerned investors continued their flight to safety.

"We are still seeing the backlash from the credit crunch and the fall in markets in January," said Mona Patel, a spokeswoman for the IMA. "While £9bn was invested, the net downturn shows a clear lack of confidence in market stability."

There was another large drop in sales of Individual Savings Accounts (ISAs) in January. Net sales of UK-domiciled investment fund ISAs saw outflows of £68.4m over the month, compared with inflows of £17m in December and £30.9m in January 2007. The most popular ISA sector was Cautious Managed.

Tax-free overseas ISAs escaped relatively unscathed. Total overseas ISA assets of £348m fell very slightly from December. Net retail sales of overseas-domiciled investment fund ISAs totalled £600,000 in January, the same as the month before.

While January is traditionally a slow month in the run-up to the ISA season – which many are predicting will be quiet – the market turmoil exacerbated the fears of investors. "January is always the very start of the ISA season and this year could be very slow," Ms Patel added. "We just don't know what is going to happen."