Monday 10 September 2012
UK ASSET MANAGERS WARN OF FRAGMENTED AND EXTRA-TERRITORIAL REGULATION - LIMITING INVESTOR CHOICE AND RETURNS
In the Investment Management Association’s 10th Annual Survey (2011-2012), published today, UK asset managers have stressed their concerns over the barrage of regulation the industry is facing. There are particular concerns about fragmentation, more aggressive extra-territoriality and protectionism in different jurisdictions. While this presents an operating challenge for firms themselves, the bigger worry is how it may affect their ability to invest efficiently and effectively on behalf of their client base, both retail and institutional and overseas.
The views were expressed in interviews conducted with 30 senior figures from the asset management industry.
The interviews showed that asset managers are supportive of a coordinated global regulatory response to the financial crisis and that they appreciate the challenge faced by the different governments and regulators involved. Rather than a more joined-up response, there is now an emerging danger that a combination of extra-territoriality (e.g. aspects of the US Foreign Account Tax Compliance Act) and protectionism (e.g. aspects of the Alternative Investment Fund Managers Directive) will create an environment that prevents the industry operating in an efficient manner. While many firms are familiar with a fragmented international regulatory environment, some new regulation will affect even those with only very indirect connections to countries where the rules originate.
In addition to operational complexity, such wide reaching change could hinder fair access to global markets and investment opportunities, reducing investor choice and returns. For example, US investors living overseas will find it hard to invest their money with firms who are put off by the requirements necessary to comply with FATCA.
Interviewees also talked about the importance of regulators and the Government safeguarding the UK as a leading asset management centre, and adopting a more strategic and forward-looking approach to attract and retain business. This includes the need to engage closely and constructively with the European supervisory process, as the powers of the European Securities and Markets Authority (ESMA) are strengthened considerably. However the survey highlights that the wide reach of international regulatory change means the UK is not alone in its concerns over competitiveness.
Richard Saunders, IMA Chief Executive, said:
“We have seen a significant shift from national to international regulation, particularly over the last five years in response to the financial crisis. The IMA is currently contending with more than 35 different pieces of regulation which impact the asset management industry.
“The G20 framework was created to ensure globally co-ordinated responses to the crisis, but its high-level nature has allowed differences to develop between different jurisdictions. As a result, global asset managers are faced with complex and often contradictory rules depending on the country they are operating in.
“We are seeing a rise in more aggressive extra-territorial regulation which is adding cost and complexity to the industry and breeding protectionism in different jurisdictions. The litmus test for new regulation should be whether it brings real benefits to end investors. Too often this seems not to be applied.
“Regulators and policymakers face a hugely challenging task and we urge regulators to improve co-ordination and dialogue with the industry.”
This year’s survey also covers asset managers’ views on banking reform and pensions, along with analysis of retail investor behaviour.
Key industry statistics include:
- £4.2 trillion – total assets managed in the UK by IMA member firms as at December 2011 (£3.9trn in 2010)
- £575 billion – managed in UK authorised funds (OEICS and unit trusts) (£587bn in 2010)
- £1.6 trillion – assets managed in the UK on behalf of overseas clients (£1.4trn in 2010)
- £2.4 trillion – assets managed worldwide on behalf of UK institutional clients
- 34% - UK domestic market capitalisation accounted for by IMA members’ UK equity holdings (38% in 2010)
For further information, interviews or photographs, please contact:
- The IMA Annual Survey focuses on asset management activity in the UK on behalf of domestic and overseas clients.
- The results are based on the questionnaire responses of 85 IMA members, who between them manage £3.7 trillion in this country (90% of total assets managed in the UK by IMA members)
- In-depth interviews were also conducted with 30 senior figures from 20 IMA member firms.
About the IMA:
- The IMA is the trade body for the UK's £4.2 trillion asset management industry (retail and institutional) which is one of the world's leading investment management centres.
- Our role is to represent the interests of the asset management industry to government and regulators both in the UK and internationally.
- The money our members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.