FUND managers admitted yesterday that the slump in demand for unit trusts and other collective investment funds was partly self-inflicted as the industry reported another set of poor sale figures for January.

One of the largest retail fund managers, F&C, blamed irresponsible advertising as one of a string of factors which have led investors to shun collective investment schemes.

“The whole industry has been guilty of creating unrealistic expectations in the past,” said communications director Jason Hollands.

He pointed to the over-emphasising of past performance of some unit trusts and open-ended investment companies which had encouraged investors to expect much too much.

He also cited rising interest rates, the continuing love affair with residential property and the Government’s failure to support Individual Savings Accounts (ISAs).

Net sales of British retail funds fell to £169.7 million in January, from £554.1 million in January 2004, according to the Investment Management Association. The sales slide was also down from December when net sales were £279.3 million.

Richard Saunders, IMA chief executive, said: “2005 has started slowly with little new money flowing into investment funds and investment fund ISAs. This is in spite of continuing stock market improvement, which has seen the FTSE 100 index increase by some 50 per cent in the last two years.”

Net sales of ISAs were the weakest in four months, falling to £38.9 million from £92.8 million the previous month and from £184.4 million in January 2004. Traditionally, ISA sales start to pick up in January as taxpayers seek to shelter money before the end of the tax year in April.

The most popular products bought by investors in January were those in the UK All Companies category, accounting for 23 per cent of net sales, followed by UK equity income funds (17 per cent) and UK corporate bond funds (9 per cent).

While investors in collective funds are still shunning the market, however, there is anecdotal evidence from private client brokers that more sophisticated private investors buying shares directly are making a comeback.

• The Financial Services Authority was attacked for hitting private client brokers with fee increases of at least 75 per cent to fund compensation for victims mis-sold endowments, precipice bonds and split capital trusts. “Private client firms are being ordered to pay for compensation for failures within areas of the market in which they do not operate,” said Angela Knight, head of the Association of Private Client Investment Managers and Stockbrokers.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive