The trend over the past two decades points to increasing globalisation of the client base with a shift away from dependence on UK clients. The proportion of assets managed for UK headquartered firms has decreased from 57% to 45% in the last decade. Asset management’s contribution to the UK’s net export earnings has grown from under £300 million in the early 1990s to over £5 billion in 2012.
The significance of the shift from defined benefit (DB) to defined contribution (DC) is immense. This shift will bring asset managers increasingly into the spotlight as will changes to the retirement income rules made in Budget 2014, which created greater freedom over access to pension savings at retirement.
Governance will remain crucial, particularly following the introduction of a charge cap of 0.75% for default funds used for automatic enrolment purposes from April 2015. This will be a source of major fee pressure on the industry but may not deliver value for money for the end investor. The high number of investors remaining in a default fund will mean default design will be key to the success of automatic enrolment in the long term.
There was strong growth in UK authorised funds during 2013, increasing by 16% from £662 billion in 2012 to £770 billion in 2013. There continues to be an ongoing hunt for yield as investors search for income, as well as growing interest in asset allocation and outcome-focused approaches.
Since the introduction of the Retail Distribution Review (RDR) in January 2013, strong retail sales have continued, with net retail sales of £20 billion in 2013 significantly higher than the £14 billion that came in throughout 2012.
The UK asset management industry remains highly competitive with the top ten firms accounting for 50% of total assets.