Private investors poured £25.8 billion into funds last year, the highest on record, new figures have revealed.
The Investment Management Association (IMA) reports investors put eight times as much money into funds last year compared to 2008. This is also 45% more money invested than in 2000, the previous best-selling year.
Fund sales totalled £25.8 billion, whereas ISA sales hit £2.8 billion – the best year since 2001.
At the start of the year, the IMA reports that bond sales dominated but, following the stockmarket rally in March, equities experienced a resurgence during the second half.
Bond sales finished the year 36% ahead of equities, with net retail sales of £9.9 billion, compared to £7.3 billion for equities.
"2009 has seen investors adding to their savings at record rates,” says Richard Saunders, chief executive of the IMA. “It is good to see people once more investing via ISAs, after five years in which ISAs saw higher levels of withdrawals than investments."
Absolute Return was the second most popular IMA sector for the whole of 2009, and was the most popular in both September and December. Total net retail sales for the year were £2.5 billion, accounting for around £1 in every £10 invested in funds in the year.
Property, meanwhile, came fourth overall for the year and accounted for £1 in every £16 invested in funds in 2009 (£1.6 billion in net retail sales). It was the best-selling sector in both October and November.
This is a dramatic reversal of the position in 2008, when Property experienced net outflow of funds of £466 million and ended the year in 33rd place.
Despite the surge of interest from investors, there are concerns that investors could be putting too much money into the wrong areas.
Patrick Connolly, head of communications at AWD Chase de Vere, compares the high level of sales to the technology boom in the run-up to 2000 – he says this has been repeated with other asset classes including commercial property and fixed interest.
“While IMA sales figures have moved from bonds to equities and property during 2009, the underlying link between sales and performance is not as strong as we might expect, especially bearing in mind the extreme performance of investments,” Connolly adds.
”We are not naïve enough to believe that investors will not continue to be influenced by short-term past performance figures. They will and it will probably be to their detriment.”
Jonathan Willcocks, managing director of global sales at M&G, says that while there was an obvious investment story in 2009, the outlook for 2010 is less clear.
"A need for income may well drive flows and we are already seeing a strong pick-up in interest in commercial property," he explains. "The sector is yielding over 7% compared with derisory amounts from cash."