09 September 2014

IMA: Strong growth and increasing internationalisation in UK asset management industry

Investment fund sales have remained robust, with funds under management at a record £770 billion as at the end of last year. Over 80% of retail fund flows have been directed into lower charging share classes (Chart 22 below from full Survey) since the first stage of the Retail Distribution Review (RDR) took effect in January 2013.

Jonathan Lipkin, IMA Director of Public Policy, said: “Sustained growth in assets under management underlines the increasing importance of the industry, both for individuals seeking to save for the future, and for the wider economy in a period of constrained Government and bank-based finance. We are also seeing the industry continue to move towards solution and outcome-focused products alongside the delivery of specialist investment components. In the UK, the landscape for the sector is evolving fast, particularly as a result of recent changes in the retail distribution and pension environments. Auto-enrolment and plans to allow greater freedom to access retirement income have resulted in a particular spotlight on the role of asset managers. There is a recognition within the industry of both greater opportunity and greater responsibility in terms of product design and cost disclosure.”

The survey also revealed the following broad trends:

• Increasing internationalisation of the sector over the past decade with a significant rise in activity on behalf of overseas clients (up from around a quarter of total UK assets managed by IMA members in 2003 to 40% in 2013); a decrease in the proportion of assets managed for UK headquartered firms from 57% to 45%, and also through erosion of UK equity holdings.
• Emergence of a more independent asset management industry which is no longer primarily owned by banks or insurance companies (see Chart 95 below from full Survey). There is also strong growth in the share of ownership among large diversified financial corporations (rising from 6% in 2003 to 15% in 2013), notably custodian banks.
• Evolution in product sets – products are becoming more diversified (with a shift towards client solutions and outcome-focused products, e.g. greater use of Liability Driven Investment (LDI) strategies. There is also an increase in the use of ‘alternatives’.
• Evolution in distribution channels – a key driver in changes to the distribution environment is the RDR. As expected, there is a clear movement of retail funds from the highest charging share class to lower charging share classes since the removal of commission payments to advisers was implemented in January 2013.

Full press release

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