ISA sales soar
A combination of the larger allowance (£10,200) for people aged over 50 and a renewed confidence in the stockmarket resulted in the highest ever ISA sales for any October. Net sales hit £301.1 million, almost double the amount seen in September (£162.3 million), according to the Investment Management Association (IMA).
Richard Saunders, IMA chief executive, says: "ISA sales are clearly heading for their best year since 2002."
Fidelity International is one provider that experienced a significant uplift in ISA sales in October.
"Clearly the key driver has been the increase in the ISA allowance for the over 50s – this has driven a four-fold increase in ISA investments coming from this group of investors compared to October last year," says Rob Fisher, head of UK investments at Fidelity. '
"The over 50s really have grabbed the opportunity for extra tax relief with both hands. Whether topping up an existing ISA or opening a new one, a broad range of regions and asset classes seem to appeal to them, ranging from UK equities and income funds to south east Asia and China."
According to the IMA, the most popular sector for ISA investors in October was cautious managed. Within Fidelity FundsNetwork, many investors plumped for the firm's ISA Cash Park product, although specialist funds such as JPMorgan Natural Resources and BlackRock Gold & General proved popular in October too.
Broader IMA data that includes non-ISA sales revealed that bonds are now out of favour and property is the new hot investment. In October, the property sector was the highest selling sector for investors, while the sterling corporate bond sector saw an outflow of £11.8 million.
An IMA spokeswoman says that since structured products market themselves as investment products, they should disclose everything that IMA members do. It hopes the Financial Services Authority's Retail Distribution Review, due to come into effect in 2012, and the Packaged Retail Investment Products proposals from the European Commission will bring this about.
The European Commission is expected to issue a consultation on structured products in the next few weeks.
Meanwhile the association is tasked with fitting in more than 600 offshore funds into its sectors. Luxembourg and Dublin domiciled funds that are FSA-recognised will be included in the IMA's sectors from early next year. Currently only UK-domiciled funds are covered by the IMA.
According to HSBC Global Asset Management and Baring Asset Management, one of the big changes will be the arrival of some star emerging markets funds. Over the past three years, the top performing funds in the China, India and Latin America sectors were offshore funds.
'This change could see the emerging markets peer group expand significantly, introducing a whole new range of leading funds and managers,' comments David Chellew, head of market position at HSBC Global Asset Management. 'This increased visibility of offshore funds will level the playing field.'
The practice of locating your financial affairs (banking, savings, investments) in a country other than the one you’re a citizen of, usually a low-tax jurisdiction. The appeal of offshore is it offers the potential for tax efficiency, the convenience of easy international access and a safe haven for your money. However, offshore is governed by complex, ever-changing rules (such as 2005’s European Union Savings Directive) and, as such, is the exclusive province of the wealthy and high-net-worth individuals.
Structured products offer returns based on the performance of underlying investments. Many products are linked to a stockmarket index such as the FTSE 100 or a “basket” of shares. There are generally two types of product, one offers income, the other growth and investors have to commit their capital for the prescribed term, usually three or five years. The investment is not guaranteed and if the index or basket of shares does not perform as expected over the term the investor might not get back all their capital.
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).
Corporate bonds are one of the main ways companies can raise money (the other is by issuing shares) by borrowing from the markets at a fixed rate of interest (the reason why they are also known as “fixed-interest securities”), which is called the “coupon”, paid twice yearly. But the nominal value of the bond – usually £100 – can fluctuate depending on the fortunes of the company and also the economy. However it will repay the original amount on maturity.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.