Investors failed to keep calm and carry on in 2016, despite markets hitting new highs
Investors were spooked by politics in 2016 and, despite markets like the FTSE 100 hitting record highs, fund sales were at their lowest since 2008, new figures show.
Total net sales for 2016 were £13bn, according to the Investment Association, down from £22.4bn in 2015. Retail investors proved the most pessimistic, with sales totalling £4.7bn, down from £16.4bn.
“I think 2016 was an amazing year, in that it was quite a strong year [but] it was probably the most pessimistic I’ve ever known,” Mark Dampier, head of investment research at fund supermarket Hargreaves Lansdown, told City A.M.
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I’d probably have to go back to 1988, after the stock market crashed in ‘87, to try and find an equivalent period of such bearishness among investors, even though the market went up.
It’s because I think people, since 2008, have gotten this event disease… Everyone’s centred on every future event. Brexit and Trump were two huge ones, and went the opposite way [to expectation], but of course the results in terms of stock markets were of course better than anyone said.
Despite sales falling, because of the strong performances of stock markets, total funds under management tracked by the Investment Association were up £117bn to £1.045 trillion.
Chris Cummings, chief executive of the Investment Association, said: “Despite a slowdown in net retail sales in what was an extraordinary and challenging geopolitical year, the UK asset management industry continued to grow strongly and provide value to investors, savers and pensioners across the world.
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Funds run by our members for UK investors grew by more than £100 billion in 2016, representing a significant contribution to people’s wealth and pensions, as well as the UK economy as a whole.
Ryan Hughes, head of fund selection at AJ Bell, said: “Investors moved to take risk out of their portfolios and piled into sectors that offer protection from falling share prices.
“Unfortunately, this nervousness proved unfounded as both the UK and US markets have hit record highs since then, showing how important it is to take a long term approach to stock market investing.”