18 August 2005

IFSL: New report on UK fund management

According to a new IFSL (International Financial Services London) report, assets under management of the UK fund management industry increased for the second year running in 2004 to £2,966bn. This was up 9% on 2003 and 11% on 2002. Funds are, however, still 3% lower than at the peak in 1999. The recovery over the past two years was primarily due to rising equity markets and a flow of new investments. London continues to be the leading international centre for fund management.

Insurance companies managed a third of UK funds in 2004, followed by investment banks (18%), retail banks (18%), independent fund managers (17%) and pension funds (6%). Most of the remainder was managed by custodians and hedge funds.

UK institutional funds (pension funds, insurance companies, unit and investment trusts) were the source of two-thirds of funds under management. Overseas clients generated a quarter of funds and UK private clients the remaining 8%.

Fund management makes a significant contribution to the UK economy, accounting for 0.5% of GDP, employing over 40,000 people and generating net exports of £1.42bn in 2004. Revenue of UK fund management activities totalled £7.7bn in 2004 as fund managers’ margins increased slightly to around 26% in 2004.

Worldwide conventional fund management assets (pension, insurance and mutual funds), reached $45.9 trillion at the end of 2004, up 6% on the previous year and 40% on 2002. Pension assets totalled $15.3 trillion, with a further $16.2 trillion invested in mutual funds and $14.5 trillion in insurance funds (see Table below).

There was also an additional $30.8 trillion in private wealth, of which around two thirds cannot be accounted for by other forms of conventional investment management. Part of the increase in global funds under management in dollar terms over the past two years is explained by a 19% fall in the value of the dollar during this period. The UK is the third largest market for fund management after the US and Japan. It is by far the biggest centre in Europe.

Report

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