Net sales of UK investment funds hit a record £63bn last year, according to the Investment Association


UK-focused funds were unpopular with investors (Source: Getty)

UK investors seized the bull market last year, as statistics from the Investment Association today revealed they ploughed a record net £63bn into funds last year.

Funds under management reflected this boom, ending 2017 at an all-time high of £1.2 trillion.

Chris Cummings, chief executive of the Investment Association which represents UK fund managers, said the total in funds under management was "an increase of £181bn from the previous year, with £63bn coming through net sales and £118bn through investment growth, equivalent to a 10 per cent return to investors".

"Notably, over £1bn of net retail money flowed into ethical funds, the highest annual inflow into this type of fund," he added.

The fixed income asset class, which includes instruments such as bonds and gilts, was the best-selling niche and had its best year, generating £14.3bn in net retail sales. 

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"If you knew in advance that 2017 would feature rising inflation and the first UK interest rate hike in ten years, you wouldn’t have predicted a great deal of investment in bond funds. Nonetheless these vehicles were the surprise winners when it came to attracting money last year," said Laith Khalaf, a senior analyst at Hargreaves Lansdown.

"The precise reasons for this phenomenon still remain elusive. Some cash savers may have moved up the risk spectrum in search of a better rate of return, other investors may have sought diversification from strongly rising equity markets. Others yet may simply have been expressing a negative view on the UK economy."

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Indeed for equity funds UK-focused vehicles continued to lose popularity with investors as they saw a £2.6bn outflow. The worst-selling funds were those concentrating on North America, while global was the most popular geography.

UK fund platforms, such as Hargreaves Lansdown and Fidelity, sold £7.6bn of the fund stakes, giving them a 37 per cent market share which was slightly down from 2016.

Other intermediaries, including independent financial advisers and wealth managers, saw their market share creep up to 36 per cent.

The UK is the world's second largest investment management centre after the US, and manages 36 per cent of all assets managed in Europe.

Read more: Aberdeen Standard Investments in the doghouse with four funds which lagged the market