23 September 2021

City AM: Brexit-proof: City's share of European investment management market larger than Frankfurt, Paris and Zurich combined

The City of London and the UK remain the second largest investment management centre in the world, behind New York City and other US hubs taken as one market, the Investment Association said today.

The City of London’s share of the European investment management market is larger than the combined total of Paris, Frankfurt or Zurich.

It is by far the largest investment management hub in Europe with a market share of 37 per cent, according to new data shared with City A.M. today.

The City of London and the UK remain the second largest investment management centre in the world, behind New York City and other US hubs taken as one market, the Investment Association said today.

Moreover, the UK also remains an attractive hub for overseas investors. By the end of 2020, overseas client assets accounted for 44 per cent of total assets under management, equivalent to £4.2 trillion.

Total funds under management (FUM) for UK investors saw an 11 per cent increase year on year, reaching £1.4 trillion last year.

Quick adaptation to home working, a focus on delivering for customers, and crucial interventions from the central banks were all key aspects of the industry’s recovery and resilience through the Covid–19 pandemic, the association explained.

First lockdown contraction

March 2020’s market contraction in the equity and bond markets badly hit asset valuations globally and UK investor FUM fell 11 per cent over March alone. A swift recovery followed as central banks took decisive action to calm markets.

However, the recovery in UK equity valuations has lagged other major markets, including the US. AUM in UK equities continued to fall in 2020, down three percentage points from 2019, reaching a record low of 26 per cent, whilst North American equities have grown to account for 23 per cent of equities in 2020.

The fall in UK equities also reflects the long-term trend of higher allocation to globally diverse equity and bond strategies.

Three quarters of equity assets are now invested overseas compared with just over 50 per cent ten years ago and assets in overseas bonds are 55 per cent of all bond AUM in 2020.

“Swift action of the central banks supported the global economy and the industry rallied to the cause injecting over £22bn into businesses to help them ride out the storm,” explained Chris Cummings, Chief Executive of the Investment Association.

The pandemic wasn’t the only story of 2020, however.

The green agenda continues to rise in prominence and investment managers have committed to support the transition to net zero emissions. 49 per cent of total assets managed by IA member firms apply ESG integration, up from 37 per cent in 2019.

The proportion of assets subject to sustainability focused criteria almost doubled in 2020 to 2.6 per cent of total assets.

“We saw the acceleration towards a greener economy as retail investors placed record funds into responsible and sustainable investments, seeing a new generation embracing investing,” Cummings said.

Retail investor appetite for environmentally conscious funds has been building over recent years but the pandemic brought social concerns to the fore, as net retail sales to responsible investment funds accelerated through 2020 to reach £11.7bn, a third of overall sales.

City AM