Investment fund sales still rising

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Sales of investment funds rose for the fourth month in a row during May as consumers hunted for higher returns on their cash, new figures show.

New investments into UK-based unit trusts and OEICs (open-ended investment companies) made by individuals reached £2.84 billion during the month, according to the Investment Management Association (IMA).

The figure was more than a third higher than during April and was the strongest month for sales outside of the ISA season since the group's records began in 1960.

It is thought the increase is being driven by a rise in confidence among investors that now is a good time to buy into the stock market.

Record low interest rates are also causing people to look for alternative homes for their money as returns on savings accounts have fallen to zero in some cases.

Around £1.3 billion of the total money was invested in bonds, which are less volatile than shares and can be used to provide a regular income, making them a good alternative to savings accounts for investors who are prepared to take a bit more risk.

Just under £1 billion was also put into equity funds, the highest level for 13 months, suggesting investors are ready to return to the stock market.

Investments into tax-free ISAs fell to £312.4 million during the month, down from £672.4 million in April, when inflows were boosted by the turn of the tax year.

Richard Saunders, chief executive of the IMA, said: "Retail and ISA sales continue to see strong inflows, with May's figures recording the highest net retail sales outside an ISA season since records began. The last six months alone have seen net retail sales of £10.6 billion. This is much higher than the same period a year ago when net retail sales were just £1.9 billion."

The total value of funds under management, including money held for institutional investors, rose to £391.3 billion, 4% higher than during April, but 14% below the figure for May 2008, reflecting steep stock market falls during the past year.