Investors added £43.4bn to retail funds in 2021, the second best year on record, despite the pandemic.

The only higher year for retail fund sales was 2017 which saw a net sales record of £48.6bn, according to data from the Investment Association. 

The fund management trade body said 2021 saw continued high inflows to responsible investment funds, outflows from UK equity funds, and an increased appetite for active management.

Key findings for 2021 in the fund sector were:

• Inflows to responsible investment funds totalled a record £16bn, up £4.3bn on 2020.
• Most inflows in the retail fund market went to active funds in 2021, with active funds pulling £25.2bn, compared to £18.3bn to tracker funds.
• Outflows from UK equity funds hit a record £5.3bn in 2021.
• Equity, fixed income and mixed asset funds all saw inflows of more than £10bn each, with equity funds being the most popular asset class in 2021 (£14.8bn).

December 2021 saw net retail sales of £2.3bn, with equity funds the most popular asset class with £1bn of inflows. Global remained the best-selling IA sector for the seventh consecutive month and was the best-selling sector every month of 2021, excluding May.

Tracker funds outsold active funds in December, with inflows of £1.3bn compared to £930m for active funds.

5 BEST SELLING IA SECTORS IN DEC 2021   

1. Global - net retail sales of £834m.
2. Short Term Money Market - second with net retail sales of £557m.
3. Mixed Investment 40-85% Shares - net retail sales of £366m.
4. Volatility Managed - net retail sales of £354m.
5. North America - £291m.

Source: Investment Association

The worst-selling Investment Association sector in December 2021 was UK All Companies which was hit by outflows of £781m. 

Equity funds was the best-selling asset class in December 2021, with £1bn in net retail sales. Money Market funds was the second best-selling asset class, with £572m of inflows. Fixed Income funds was the third best-selling asset class in December 2021, with £288m of inflows.

Global was the best-selling equity fund region in December 2021 with North America second and Europe third. Japan was fourth with net retail sales of £77m.

In terms of distribution channels, in December, gross retail sales for UK fund platforms totalled £12bn, a market share of 50.8%.  Gross retail sales through other UK Intermediaries including IFAs were £6bn, a market share of 25.3%.  Direct gross retail sales in December were £891m, a market share of 3.8%.  

Chris Cummings, chief executive of the Investment Association said: "Investors put their lockdown savings to work in 2021, with near record inflows to retail funds in 2021 helping investors take part in the global Covid-19 market bounce-back. 

“This was particularly so in the first half of the year, when monthly inflows into funds peaked at £6.2bn at the end of the 2021 ISA season in April. While new variants of Covid-19 appeared throughout the year, every month of 2021 saw net inflows - against a backdrop of rising prices eroding the value of saving in cash.

“The return of significant inflation in the second half of 2021 indeed left its mark, with falling flows into bond funds, but overall investor confidence remained resilient. Growing focus on climate change in the year Glasgow hosted COP26 also helped take flows into responsible investment funds to new heights.”