IAIM reports upswing in retail funds market

Investor confidence returned in 2003 as the value of retail investment products under management grew by 17 per cent, according to the annual survey of the retail funds market by the Irish Association of Investment Managers (IAIM).

At the end of 2003, the value of money held by individual investors in retail products stood at €18.9 billion, up from €16.1 billion at the start of the year. This excludes pensions but includes personal retirement savings accounts (PRSAs).

The value of new business was €1.9 billion, an increase of 34 per cent on the volume of cash flows invested in 2002.

Net flows into unit-linked funds were 14 per cent higher than the amount invested in 2000, when stock markets peaked. Some €1.2 billion flowed into unitised funds last year.

"2003 was a very strong result when the pervasive sense was of caution and doom," said Mr Gary Connolly, chairman of the IAIM retail committee. This "doom and gloom" about investment markets was overdone, according to the IAIM. Investors who saw good value came back to the market, albeit in a "reasonably cautious" manner, Mr Connolly said.

There was a 45 per cent increase in the amount under management in tracker bonds, which typically give investors a guarantee that their initial capital will be protected. Some €470 million new money was placed in the bonds in 2003, more than nine times greater than the sum invested the previous year.

However, the market for with-profit investments collapsed, with a 75 per cent drop in the net cash invested. Mr Connolly attributed this to changes in with-profits contracts, pressure on bonus rates and bad press.

There was good news for holders of equity-linked Special Savings Incentive Accounts (SSIAs) as a strong recovery in managed fund returns during the year dragged the Government-sponsored savings accounts back into positive territory.

PRSAs, appear on the survey for the first time, contributing a net inflow of €32 million. Ms Ann Fitzgerald, secretary general of the IAIM, said it would be closely monitoring the growth of the amounts invested into PRSAs over the next few years.