- Investment managers are focused on technological opportunities and threats in distribution channels but are less worried about new entrants from the tech sector disrupting manufacturing of investment funds and services (p39).
- The UK retail funds market is seeing both ongoing structural change and cyclical behaviour by savers. Sales of asset allocation and outcome-oriented products remain robust, but alongside strong flows into equity and property (p58).
- The new pension freedoms will add to the transformation of retirement savings and lead to demand for outcome-focused funds, income generation and more diversified multi-asset portfolios (p27).
- Scrutiny of the industry by regulators, politicians and stakeholders places further emphasis on the need for asset managers to build confidence in the sector (p35).
Jonathan Lipkin, Director of Public Policy at the Investment Association, said:
"Growth in the UK asset management industry remains very strong, with the UK a pre-eminent international centre. Alongside significant opportunities, however, are a broad range of challenges for investment managers. Technological change represents a mixture of opportunity and threat, with the future of distribution an increasing preoccupation.
"Recent industry growth partly reflects the rapidly evolving role of asset managers in serving the needs of institutions and individual savers. Our findings once again point to a changing product set, with a greater focus on solutions, particularly in the pensions market.
"The implementation of the 'Freedom and Choice' retirement income reforms is a particular focus for the UK industry, and is likely to see a diverse set of behaviour by savers. The industry is conscious of the need to ensure products are well-designed with clear investment objectives and transparent fees."
Key insights on investor behaviour:
- The long-term decline in levels of equity ownership shows some signs of having stabilised, although equities fell slightly in 2014 as a proportion of overall holdings, reversing the increase in 2013. This stabilisation is seen for the overall market and for authorised funds (p57).
- Institutional investors' demand for alternative assets continued to grow in search for diversification and other sources of a return and income. Allocation to alternatives increased to 13% (2014) from 11% (2013) (p16).
- The survey has asked investment managers for the share of their assets in enhanced-index funds - otherwise known as 'smart beta' - for the first time. It found that 75% of UK-managed assets are actively managed, 20% are passive and 3% are 'smart beta' (p21).
- £835 billion was invested into authorised funds by the end of 2014 - equity income and property funds were the most popular as investors continued to look for yield in a low interest rate environment (p58).
- 2014 saw the first increase in UK equity holdings since 2009, increasing by one percentage point from 2013 to 32% in 2014 (p18).
Fixed Income funds have regained their footing, with sales recovering substantially compared to 2013 (p58).
Key industry trends:
- The industry continues to reach record UK assets under management of £5.5 trillion as at the end of 2014, growth of 9% from 2013.
- The proportion of assets represented by insurance continued to fall to an all-time low of 18% (p15).
- The number of independent asset managers has risen sharply in recent years, and investment firms not owned by other firms now manage 41% of industry assets (p27).
The full survey is available to download on the Investment Association website.