The Industry in Figures
Ten years of the IMA survey offer the opportunity to observe a significant evolution in investor behaviour, particularly with regard to the proportion of equities in institutional and retail portfolios.
This is perhaps not surprising after the highly volatile performance of the stock market over the last decade or so, which has ultimately resulted in little or no overall gain for investors.
Some of our interviewees suggest that interest in LDI and outcome-oriented strategies indicates the shape of things to come. Assets subject to Liability Driven Investment mandates reached £320bn in 2011, up over 25% year-on-year.
However, in the retail market, our figures suggest that talk of a “flight from equities” in absolute terms is overdone. Authorised funds now hold 10% of the total UK equity market, double the figure two decades ago.
Industry Overview
- IMA members manage a total of £4.2trn assets in the UK, with the wider industry estimated at £4.9trn
- Institutional clients represent nearly 81% of the total; retail and private clients accounted for 18% and 1.2%, respectively
- Passively managed assets increased to 22% of total UK assets under management
- Of the £4.2trn, the largest proportion was invested in equities (42%), closely followed by fixed income (38%)
- UK equities decreased to 37% of the overall equity allocation, continuing a long-term decline
- Of the 38% invested in fixed income, the largest share was held in £ Sterling Corporate (25%), followed by UK Government bonds (21%)
UK Institutional Market
- IMA members manage an estimated £2.4trn on behalf of UK institutional clients, of which third party mandates amount to £1.5trn
- Pension funds and insurance companies represent the largest third party client type with 71% and 9.3%, respectively
- Total UK pension fund assets stood at £1.9trn, with IMA members managing 90% of that total
- Specialist mandates account for 67% of the total, and would increase to 88% if LDI business was excluded
- Within specialist mandates, the largest proportion is focused on equities (44%) followed by fixed income (37%)
- Of the 44% in specialist equity mandates, global equities dominate with 35%. UK equities represent 31%
- Within specialist fixed income mandates, the largest category is again £ Sterling Corporate (37%), followed by UK index-linked gilts (20%)
UK Fund Market
- UK authorised funds represent £575bn, including overseas-domiciled funds whose assets are managed in the UK, total funds managed in the UK are estimated at £1.3trn
- Of the £575bn in UK authorised funds, equity funds account for the largest share (53%), followed by fixed income (18%) and mixed asset funds (14%)
- Total net sales of UK authorised funds stand at £23bn, driven primarily by retail investors (£18bn)
- This is a sharp slowdown from 2009-2010, when retail flows appear to have benefited from the relative unpopularity of bank and building society deposits
- Mixed asset funds were the most popular fund type among retail investors in 2011, attracting £5.6bn of new money, followed by fixed income funds (£4.5bn)
- The UK continues to have a considerably higher equity allocation compared to the European average (60% vs 29% of UCITS funds)
Operational and Structural Issues
- Total industry revenue is at an estimated £12bn while costs are £8.1bn. Expressed as a proportion of average assets under management, this equates to 30bps and 20bps, respectively
- The total direct industry headcount is at 29,500. Of these, around 18% are foreign nationals
- The largest staff segments continue to be represented by core asset management activities, although the recent period has also seen growth in compliance, legal and audit functions
- The UK industry continues to be very unconcentrated, with the top five and top 10 largest firms accounting for 35% and 51% of total UK assets, respectively
- The Herfindahl-Hirschman Index (HHI) is a widely-used measure of industry concentration. As at June 2011, the asset management industry scored 465
- Independent asset managers continue to gain market share with 37% of total assets, compared with insurance companies at 28%
International Dimension
- As an asset management location the UK continues to be second largest after the US, representing 33% of European assets under management
- IMA members manage 37% (£1.6trn) of total UK assets on behalf of overseas clients
- The proportion of UK-headquartered firms decreased to 48% of total UK assets, managing £1.8trn in the UK and a further £2.0trn abroad
- An estimated £765bn in overseas-domiciled funds is managed in the UK, with Dublin and Luxembourg as the most popular locations. The UK continues to rank fifth as a European fund domicile
- IMA members and the groups of which they are part have an estimated £22trn in assets under management worldwide
