UK savers invested £43.4bn in retail funds in 2021, data published by the Investment Association (IA) has revealed.

This figure fell around £5bn short of the record 2017 net retail sales of £48.6bn.

The IA said that 2021 had been a year characterised by continued high inflows to responsible investment funds, outflows from UK equity funds, as well as an increased appetite for active-style management.

According to the data, inflows to responsible investment funds totalled a record £16bn, a figure 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.

The IA also reported that outflows from UK equity funds reached a record £5.3bn in 2021. This was larger than the previous record of £4.9bn in 2016, when the UK voted to leave the European Union.

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, at £14.8bn.

“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,” said IA chief executive, Chris Cummings.

“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.”

Hargreaves Lansdown head of investment analysis and research, Emma Wall, added: “It’s fantastic to see so many investors putting money into equity funds over the last 12 months and participating in the rally that was 2021.

“Preference was given to responsible investment funds, proving that 2020 was no one year trick pony and that this structural trend is here to stay. The real test however, for both responsible funds and equity funds across all sectors, will be the coming 12 months when we expect to see increased market volatility and for many markets, negative returns.

“Investors should hold tight, remain focused on their long term goals and ensure that their portfolios are diversified across asset classes, geographies and styles to help mitigate losses.”

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