The term collective investments is used to refer to pooled investments, which are divided into units or shares. Through the purchase of these units or shares, the ordinary investor gains access to a wide range of underlying investments that would otherwise be outside his or her scope. As such, collective investments provide a cost-effective way for even the smallest investor to procure a balanced investment portfolio.

Since collective investments spread contributions over a wide selection of securities, they are generally regarded as the most prudent approach to equities. However, as with all stockmarket investments there is always an element of uncertainty, with the level of risk varying from fund to fund depending on their investment focus. For example, there are specialist funds that invest in particular regions or sectors, such as the Far East, emerging markets or biotechnology.

There are three main types of collective investment: unit trusts, open-ended investment companies (OEICs) and investment trusts. All three pool investors' funds and buy shares or bonds, but there are distinct differences. Mintel's report examines these differences, as well as the relative sizes of the three markets, drawing on a range of sources and statistics. The other main aspects covered in the report include market factors, key players, products and pricing, distribution and promotion and the market's future outlook. Market forecasts to 2006 are presented in the final section.

It has been a difficult year for all stockmarket investments and the worst may not be over

Since Mintel's previous report on the collective investment market, published in August 2001, the bear market that gripped the UK stock market following the dotcom crash in early 2000 has not abated. In fact, the investment landscape has become even bleaker. The terrorist attacks on the US in September 2001, the slowdown in the global economy, the plight of FTSE 100 companies such as Marconi and Railtrack, and the recent accounting scandals at Enron and Worldcom have all taken their toll on investor confidence and the value of equities.

At the time of writing, the FTSE 100 made headlines for having fallen below the 4,000 mark (July 2002), and was last at this level in 1996. Likewise, over the past two years, the FTSE All Share has fallen by 40%. Consequently, many stockmarket investments have experienced a fall in value. Indeed, since the start of 2002, both sales of unit and investment trusts and the values of their funds under management have declined. Furthermore, the continuing adverse publicity surrounding the fall in value of split capital investment trusts (SCITs) is having implications for the whole collective investment industry.

Against this turbulent backdrop, Mintel commissioned exclusive consumer research to ascertain penetration of collective investment products among consumers. A sample of 2,089 adults aged 16+ were questioned about their investment buying habits and attitudes to risk between 16 and 21 May 2002, in order to elicit this insightful information. The findings are presented in The Consumer section of this report.

Readers may also find the following Mintel reports of interest:

- ISAs, Finance Intelligence - UK Report, June 2002

- Investment Bonds and Safe Haven Alternatives, Finance Intelligence - UK Report, May 2002

- British Lifestyles, Special - UK Report, January 2002

and the forthcoming:

- Savings and Deposit Accounts, Finance Intelligence - UK Report, September 2002

- Shareholding, Finance Intelligence - UK Report, October 2002.