£1.5bn flows into investment funds

Private investors are pouring three times as much money into investment funds as into personal pensions, according to a new survey by the Irish Association of Investment Managers (IAIM).

More than £1.5 billion (€1.9 billion) was invested by individuals in investment funds on the Irish market in 1999, an increase of in excess of 60 per cent on the previous year. In contrast, the personal pensions market had an estimated cash flow of less than £500 million in 1999.

The growth in funds is driven by increased personal wealth, low interest rates and the advantages of these funds over other investment products, the IAIM maintains. The value of investment funds grew by almost 20 per cent to just more than £12 billion in 1999.

Unitised funds were the fastest growing segment of the retail investment market, with growth of 329 per cent over the previous year. Net flows into with-profits investments grew by 43 per cent and tracker bonds by 15 per cent.

Of the unitised funds, managed funds were the most popular, attracting 41 per cent of investments. These were followed by equity funds at 24 per cent, cash/ fixed interest funds at 20 per cent, and property funds at 15 per cent.

Five-year returns on managed funds amounted to approximately 97 per cent. Equity and property funds returned 120 and 121 per cent respectively. These figures, which are after taxes and charges, compare with 15 per cent from building society deposit accounts and 31 per cent from An Post over the five-year period.

The chairman of IAIM retail funds committee, Mr Prahmit Ghose, said the transition to unitised funds showed the increasing sophistication of the Irish retail investor and would lead to further innovation of product development.

The value of investments in 1999 would have been much higher, but the Eircom flotation held back flows in the second half of the year, he said.

Investment trends here reflect international patterns. There was record demand for equity funds in Europe last year, with European mutual funds receiving an estimated investment of €85 billion. Ireland was joint third, with the UK, in personal investment growth in Europe last year, at 60 per cent.