Investors flocked into tracker and funds of funds in 2011 - but ethical funds suffered a fall. Read on to get the full picture.

By Charlotte Beugge

Sales of tracker funds last year were the highest since records started in 2003, according to the Investment Management Association.

Funds tracking stock market indices accounted for 8% of total investment fund sales last year, with £39 billion under management by the end of the year up from £38.3 billion in 2010.

However, by the final quarter of 2011 net sales of tracker funds were £341 million, the lowest figure seen since the first quarter of 2010.

Funds of funds had a bumper year, with the amount under management growing from £56.4 billion in 2010 to £60.2 billion. Last year, £1 in every £9 invested in funds was invested in funds of funds.

Investment in funds of funds now account for 10.5% of total funds under management, the highest market share on record and up from 9.6% in 2010.

Funds of funds are, as their name suggests, funds which instead of investing in direct shares instead take stakes in other funds. The idea is that by doing so they are buying into the expertise of external fund managers.

More than half of the money in funds of funds is with those which put their money in external funds rather than just choosing from funds operated by their own company.

Ethical funds saw a fall in popularity in 2011, with £6.7 million under management compared with £6.9 billion in 2010. The number of ethical funds slipped from 54 in 2010 to 52.