Isa sales plunge 35% in a month

SMALL investors deserted the stock market in their droves last month. New figures show net sales of Isa funds were 35% less in June than in May.

The industry has blamed falling markets for scaring off investors. The FTSE 100 index slid 10% in June and, at around 4,100, has fallen around 22% so far this year.

The Investment Management Association, which represents the unit trust industry, said year on year, net Isa sales were down 37% at £300m.

But IMA chief executive Richard Saunders stressed the sales fall was due mainly to investors refusing to commit new money rather than cashing in their existing holdings.

'It is encouraging that, despite falling markets, there has been no significant increase in repurchases, suggesting that investors are not indulging in panic selling,' he said. 'They appear to understand that volatility is an inherent part of stock market investment and realise the need to stay invested for the long term.'

He also pointed out there was a rise in investors saving regularly - one way of reducing risk - to more than two million people, although the amount being saved in the last three months was down nearly 4% on the previous quarter.

UK equity income funds and those that invest in corporate bonds, both considered relative havens of safety, and Far East funds enjoyed the strongest sales growth. General UK funds and those that invest in North America and Europe saw sales slide.

The total amount under management, including insitutional funds slipped from £240bn to £222bn.