After several years of strong growth, both gross and net retail sales of collective investments have started to falter in 2008. Increased economic uncertainty, and daily stock market volatility related to the ongoing credit crunch crisis have put investors in a particularly defensive mood, with investor sentiment dropping to levels last seen since the dotcom crash. As investors seek more security, more money is currently being taken out of collective investments then is going into them.

While prospects for the collective investment market are likely to remain challenging over the near term, there have been several positive developments that bode favourably for the long-term vitality of the industry. For example, regulatory developments such as the simplification of the CGT regime and EU directives designed to create a more competitive marketplace are likely to make investing in collectives more attractive and cost efficient. Furthermore, although take up of collective investments is low relative to other long-terms savings and investment products, demographic projections indicate that the potential market is set to expand as the UK population continues to age and grow in affluence.

This report examines the key issues facing the collective investment industry, ranging from demographic and economic factors to the potential impact of changes in the regulatory environment and competing long-term investment products. A Market Size section details the growth in collectives, while the report also identifies the key players and their performance within the market place. Finally, consumer research highlights attitudes and behaviour towards collective investments, risk and long term saving and investing in general.

Key report themes:

In addition to rising economic uncertainty, increased levels of inflation mean that investors have fewer funds available to invest.

Complicated charging structures, poor fund performance and questions about the ability of fund mangers are undermining confidence in collective investment market.

Fund supermarkets are lowering the cost of investing in collectives but still require investors to do their own due diligence when it comes to fund selection.

Reported ownership of collective investments among the overall population is very low with most people preferring to hold savings and investment products on the lower end of the risk scale.

Although the target market looks set to expand, the majority of British consumers are highly risk averse with very few being prepared to take on a high level of risk in order to maximise returns.

Banks or building societies and IFAs remain the top sources for advice but overall interest in investing has declined significantly over the past year.

Regulatory developments are encouraging but some may be difficult and costly to implement.