SUMMAry Global fund management conventional assets under management of the global fund management industry increased by 14% in 2009, to $71.3 trillion charts 1 and 2, slightly below reco
Trang 1The UK is one of the largest markets in the world for fund management
along with the US and Japan It has a strong international orientation and
attracts significant overseas funds London is the leading international
centre for fund management
SUMMAry
Global fund management conventional assets under management of
the global fund management industry increased by 14% in 2009, to $71.3
trillion (charts 1 and 2), slightly below record levels seen two years earlier
Pension assets accounted for $28.0 trillion of the total, with $22.9 trillion
invested in mutual funds and $20.4 trillion in insurance funds Together
with alternative assets (sovereign wealth funds, hedge funds, private
equity funds and exchange traded funds) and funds of wealthy individuals,
assets of the global fund management industry totalled around $105
trillion at the end of 2009, up 15% on the previous year
The increase in 2009 followed a 18% decline in the previous year and was
largely a result of the recovery in equity markets during the year Part of
the reason for the increase in dollar terms was the depreciation in the
value of the US dollar against a number of currencies in 2009 Although
some funds were exposed to instruments which suffered losses, on the
whole, fund management was affected much less than the banking sector
by the recent economic downturn The economic downturn may however
have a longer-term effect on the fund management industry in prompting
more cautious investment strategies in the coming years and more
diversification across asset classes and geographical regions
The US remained by far the biggest source of funds in 2009, accounting
for around a half of conventional assets under management or some
$36 trillion The UK was the second largest centre in the world and by far
the largest in Europe with around 9% of the global total
UK fund management UK assets under management increased 12% in
2009 to £4.1 trillion This was slightly below the record amount under
management two years earlier These figures represent a conservative
estimate as they do not take into account significant funds managed in the
UK for which there are no precise data such as funds managed on behalf
of sovereign wealth funds as well as private client funds managed, for
example, by family offices
The UK fund management sector has a strong international orientation
reflected in the: institutional presence of a broad mix of UK and foreign
firms; investment of over a quarter of institutional clients' portfolios in
overseas securities; and management on behalf of overseas clients of
funds totalling over £1.4 trillion London is central to the UK’s strong
international position Edinburgh and Glasgow are also important
international centres for fund management
Fund management accounted for 0.67% of UK GDP in 2009 and provided
employment for over 50,000 people Net exports of UK fund management
totalled £2.9bn in 2009 Fund management margins fell to 33% in 2009
from 34% in the previous year and 37% in 2007
1
0 5 10 15 20 25 30 35 40 Private wealth 1
ETFs Hedge funds Private equity SWFs Insurance funds Mutual funds Pension funds
Source: TheCityUK estimates
assets under management, 2009, $ trillion
Chart 1 Global fund management industry assets under management
conventional investment management assets
non-conventional (alternative) investment management assets
1 around one-third of private wealth is incorporated in conventional investment management
28.0 22.9 20.4
2.5 1.7 3.8
39.0 1.0
Source: TheCityUK estimates
conventional assets under management, $ trillion
Chart 2 Global fund management of conventional assets
0 10 20 30 40 50 60 70 80
2009
2008 2007
2006 2005
2004 2003
2002 2001 2000
62.7
39.8 40.1 37.7
46.9 53.658.9 66.7
76.4 71.3
Trang 2GLObAL FUND MANAGeMeNT
According to ThecityUK estimates, assets of the global fund
management industry totalled over $105 trillion, up 15% on the
previous year (chart 1) There was also an additional $13
trillion held in money market funds
Assets of the global fund management industry consist of:
- Conventional funds (pension funds, mutual funds and
insurance companies) totalling $71.3 trillion at the end of
2009;
- Alternative funds (hedge funds, private equity funds,
exchange traded funds and sovereign wealth funds)
generating some $9 trillion of funds; and
- Private wealth funds which generated an additional $39.0 trillion in
funds About a third of this was however incorporated in other forms
of investment management
The increase in assets under management in 2009 was largely a result of
a recovery in equity markets following a sharp fall in the previous year
Part of the reason for the increase in dollar terms was the depreciation in
the value of the US dollar against a number of currencies in 2009
Although some funds were exposed to instruments which suffered losses,
on the whole, fund management was affected much less than the banking
sector by the recent economic downturn
Conventional funds of the global asset management industry increased
by 14% in 2009 to $71.3 trillion, following a sharp fall in the previous year
(chart 2) Pension assets accounted for $28.0 trillion, with a further $22.9
trillion invested in mutual funds and $20.4 trillion in insurance funds
(Table 1)
The US was by far the largest source of conventional funds under
management in 2009 with around a half of the world total It was followed
by the UK with 9% and Japan and France with 6% each Rankings based
on sources of assets understate the UK’s position due to the substantial
value of funds managed there on behalf of overseas clients Taking these
into account, funds managed in the UK are by far the largest in Europe
The Asia-Pacific region has shown the strongest growth in recent years
many fund management firms have shown an increased interest
in countries such as china and India as they offer huge potential for
growth
of the largest countries, the UK has the highest ratio of funds as a per cent
of GDP (278% in 2009), followed by the US (252%), Switzerland (223%)
and Netherlands (202%) as shown in chart 3 The global average was
123%
- Pension fund assets Global pension assets totalled $28.0 trillion at the
end of 2009 according to ThecityUK estimates based on oEcD data
The US remains the largest single market with $18.1 trillion in pension
assets, nearly two-thirds of the world total The UK was the second
Source: TheCityUK estimates based on Watson Wyatt, OECD, Insurance, Inf Inst., IMF, Investment Company Institute, SwissRe, CEA data
% of GDP, (by source of funds), 2009
Chart 3 Funds as percent of GDP
0 50 100 150 200 250
Insurance assets Pension assets
World
France Netherlands
Switzerland US
UK
278
223 252
123
202 157
1 figures are for domestically sourced funds regardless where they are managed
No reliable comparisons are available for total funds under management by country
Source: TheCityUK estimates based on Watson Wyatt, OECD, Insurance Information Institute, Investment Company Institute, SwissRe, CEA data
Table 1 Sources of conventional investment management assets 1
US
UK Japan France Germany Netherlands Switzerland Other Total
Pension funds 18,088 2,544 1,043 219 174 1,028 547 4,353 27,996
Mutual funds 11,121 729 661 1,806 318 96 168 7,984 22,883
Insurance assets 6,671 2,808 2,785 2,188 1,844 484 387 2,724 20,383
conventional 35,880 6,081 4,489 4,213 2,336 1,608 1,102 15,062 71,262
% share 50 9 6 6 3 2 2 21 100
Trang 3largest centre (with 9% of the world total) followed by the Netherlands
(4%) The large volume of pension assets in the US is mainly a
reflection of its substantial domestic market The UK pension system
with assets equivalent to 116% of GDP in 2009, is more heavily
funded than most other major European economies
- Insurance funds ThecityUK estimates that insurance companies held
around $20.4 trillion of funds under management at the end of 2009
Approximately four-fifths of the total was from long-term insurance
policies and the remainder from general policies, such as health and
property and casualty insurance over the past decade, insurance
funds grew faster in Europe than in the US Life companies’ funds also
grew faster than non-life ones UK insurance companies’ funds under
management totalled around $2.8 trillion, much higher than in any
other European country
- Mutual funds’ assets increased by 21% in 2009 to $22.9 trillion
following a 27% decline in the previous year The bulk of the increase
came in the second and third quarters in the year (chart 4) most
mutual funds are generated in only a few countries The US was by far
the biggest source of funds with more than a half of the world total
UK mutual funds increased by 44% in 2009 to $729bn However, this
was still below the record $897bn held two years earlier other
important centres for mutual funds include France, Luxembourg,
Australia, Italy and Japan
Institutional clients account for the majority of funds There are substantial
variations, however, between countries in the institutional to retail ratio In
France for example, the retail sector accounted for more than a half of
funds on the other hand institutional investors were the biggest source of
funds in the US, UK and Japan
Alternative funds totalled around $9 trillion at the end of 2009 They
consist of hedge funds, private equity funds, exchange traded funds and
sovereign wealth funds (these topics are covered in more detail in other
ThecityUK reports):
- Hedge funds’ assets under management increased by 13% in 2009 to
$1,700bn This followed a 30% decline in the previous year
Redemptions continued for the second year running, albeit at a slower
pace The 19% return in 2009, the best hedge funds’ performance in
a decade, more than made up for the $85bn in net outflows The
number of hedge funds totalled around 9,400 at the end of the year,
a reduction of more than 1,000 from the peak seen two years earlier
New hedge fund launches however exceeded the number of
liquidations in the second half of 2009 Growth of hedge fund industry
assets is likely to continue in the coming years barring further
economic turbulence or major regulatory changes
London is the second largest global centre for hedge funds managers
after New York Its share of the global hedge fund industry more than
doubled in the decade up to 2009 to 20% (chart 5) London is much
the largest European centre for the management of hedge funds At
the end of 2009, four-fifths of European hedge fund investments
totalling $382bn were managed out of the UK, the vast majority from
London
Source: Investment Company Institute
assets under management, $ trillion
Chart 4 Worldwide Mutual Funds Assets
0 5 10 15 20 25 30
Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
18.2 20.3 22.4 23.0 23.0
24.8 24.7
21.7 18.9
Source: TheCityUK estimates
Chart 6 Share of global hedge fund industry, London vs New York
% share of global hedge fund assets by location of manager
0 5 10 15 20 25 30 35 40 45 50 55
New York London
2009 2008 2007 2006 2005 2004 2003 2002 2001 2000
Chart 5 Global hedge funds
Source: TheCityUK estimates
Number (line)
$bn assets (bars)
0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200
4,000 6,000 8,000 10,000 12,000
2009 2008 2007 2006 2005 2004 2003 2002 2001 2000
Trang 4- Private equity According to ThecityUK estimates, $91bn of private
equity was invested globally in 2009, a significant fall from the $181bn
invested in the previous year The 2009 total was more than 70%
down on record levels seen in 2007 Funds raised fell by two thirds
during the year to $150bn, the lowest annual amount raised since
2004 Total private equity funds under management were unchanged
from the previous year at a record $2.5 trillion (chart 7) most of this
total resulted from strong fund raising activity in the period between
2005 and 2008 and unrealised portfolio investments, as firms were
reluctant to exit their stakes in market conditions of falling
valuations Funds available for investments totalled 40% of assets
under management or some $1 trillion These funds can be used to
inject capital into troubled portfolio companies or to fund new
investments
- Sovereign Wealth Funds (SWFs) ThecityUK estimates that assets
under management of SwFs fell by 3% in 2009 to around $3.8 trillion
(chart 8) The underlying value of SwFs’ portfolios probably increased
by 15% in 2009 if negative positions on equity market investments at
the end of the previous year are taken into account SwFs funded by
commodities exports, primarily oil exports, accounted for nearly
two-thirds of assets The remainder was funded by transfer of assets from
official foreign exchange reserves, and in some cases from
government budget surpluses, pension reserves and privatisation
revenue There was also an additional $6.5 trillion held in other
sovereign investment vehicles, such as pension reserve funds and
development funds ThecityUK projections are that SwFs are likely to
double from their current level to around $5.5 trillion in 2012 London
is an important centre in the management of sovereign wealth funds
assets, although it is difficult to estimate the size of funds managed
there due to lack of precise data
- Exchange Traded Funds (ETFs) Assets invested in ETFs increased by
45% in 2009 to a record $1,032bn as the markets recovered during
the year (chart 9 and Table 2) The global ETF industry had 1,939 ETFs
on 40 exchanges around the world at the end of 2009 The number of
ETFs listed in Europe reached 821 during the year, surpassing the 772
in the US Institutional investors have been behind most of the
increase in ETF industry assets since the first fund was launched in
1993 in the US and in 2000 in Europe, but retail investors are
expected to become more active in coming years The US is the
leading global centre for ETFs and accounted for 68% of global assets
under management in 2009 Europe generated around 22% of the
total with Germany and France accounting for more than a half of the
Source: Blackrock
Assets,
$bn
Chart 9 Exchange-Traded Funds
0 100 200 300 400 500 600 700 800 900 1000
Europe US
2009
2008 2007
2006 2005
2004 2003
2002 2001
500 1000 1500 2000
Number of funds
0 500 1,000 1,500 2,000 2,500 Unrealised portfolio valueFunds available for investment
2009 2008 2007 2006 2005 2004 2003
Source: Preqin; TheCityUK estimates
$bn
Chart 7 Private equity worldwide assets under management
47%
57%
43%
54%
46% 40%
60%
59%
41%
56%
44%
53%
40% 60%
Chart 8 Sovereign wealth funds assets under management
0 500 1,000 1,500 2,000 2,500 3,000 3,500
4,000
Commodity Non-commodity
2009 2007 2005 2003 2001 1999 Source: TheCityUK estimates
$bn
87%
13%
66%
34%
exchange Traded Funds are passively managed open-ended funds that are
listed and traded on exchanges ETFs provide easy access to a broad
exposure of stock market, fixed income and commodity indices most ETFs
consist of a basket of securities that trade at approximately the same price as
the net asset value of its underlying assets They predominantly track an
index, such as the S&P 500 and can be traded continuously during trading
hours more recently, ETF products are venturing into emerging markets, real
estate, infrastructure, private equity and hedge funds Because ETFs can be
economically acquired, held, and disposed of, some investors invest in ETF
shares as a long-term investment for asset allocation purposes, while other
investors trade ETF shares frequently to implement short-term investment
strategies
Trang 5European total The 142 ETFs listed in London accounted for around
5% of global assets ETFs investing in the stock markets of Brazil,
china, South Korea and Taiwan have shown the fastest growth in
2009
Equity exposure accounted for 81% of global ETF assets at the end of
2009, followed by fixed income 16%, with most of the remainder
invested in commodities The NYSE and Nasdaq were dominant in the
trading of ETFs with 83% of the volume of trade (chart 10) in 2009
They were followed by Deutsche Borse and the London Stock
Exchange
Private wealth funds The annual World Wealth Report 2010 published
by merrill Lynch capgemini estimated that in 2009 the value of funds
managed on behalf of 10 million high NwIs with over $1m of investable
worldwide assets increased 19% to $39 trillion (chart 11) Following a
24% fall in the previous year, the value of ultra-HNwIs’ assets under
management rose by 22% in 2009 The US, Japan and Germany accounted
for close to 54% of the world’s HNwI population at the end of 2009, down
slightly from the previous year
The trends in 2009 show that the HNwI population allocated more to
fixed-income instruments and markets outside their home regions than
in previous years, in search of more consistant returns and geographic
diversification At the end of 2009, equities accounted for 29% of total
global HNwI financial assets (up from 25% in 2008), fixed-income
31% (29%), cash 17% (21%), with the remainder in real estate and
alternative investments BcG, in its annual report Global Wealth 2010,
estimated that the total value of assets managed on behalf of all investors
increased by 21% in 2009 to $111.5 trillion, following a 12% fall in the
previous year
Managers of funds The latest available data shows that assets under
management of the world’s largest 500 fund managers declined 23% in
2008 to $53.4 trillion (chart 12) Funds under management of the top 500
are likely to have staged a recovery in 2009 in parallel with the increase in
global assets under management of the fund management industry US
and UK owned firms held the bulk of the total in 2008 with 42% and 11%
respectively Swiss, Japanese, German and French firms held between 5%
and 8% each The proportion of assets managed by managers in
developing countries totalled around 4% more recent data for managers
of top 300 pension funds show that, assets increased 8.2% during 2009 to
Difference between eTFs and mutual funds
while ETFs share some basic characteristics with mutual funds, there remain key
operational and structural differences between the two types of investment
products ETFs are similar to mutual funds because both instruments bundle
together securities in order to offer investors diversified portfolios ETFs trade
throughout the trading day, like a stock, while mutual funds trade only at the end
of the day at the net asset value price most ETFs track a particular index and
therefore have lower operating expenses than actively invested mutual funds
Investors purchase and sell ETF shares on a stock exchange through a
broker-dealer, like they would any other type of stock In contrast, mutual fund shares
are not listed on stock exchanges but are bought and sold through a variety of
distribution channels In addition, ETFs have greater tax efficiency due to a
structure that allows them to substantially decrease or avoid exposure to capital
gains tax
Sources: Boston Consulting Group (BCG), Merrill Lynch Capgemini (MLCG)
value of assets, $ trillion
Chart 11 Private wealth
All investors (BCG)
High Net Worth Individuals (MLCG)
20 40 60 80 100 120
2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999
Source: Barclays Global Investors
US Germany France UK Japan Canada Hong Kong Switzerland Others Total
assets
$bn 665 96 54 47 25 29 21 18 77 1,032
Table 2 ETFs by country
2008 assets
$bn 497 63 39 25 27 13 14 11 22 711
2009 -Number listed 753 331 224 142 68 109 22 42 248 1,939
2007 assets
$bn 581 50 40 23 34 18 13 8 30 797
% share assets 68 9 5 4 3 3 2 2 4 100 Source: World Federation of Exchanges
Chart 10 Trading of ETFs
% share, 2009
NYSE Euronext (US)
Others London Stock
Exchange, 2%
Deutsche Borse Nasdaq OMX
NYSE Euronext (Europe), 2%
3%
10%
17%
66%
Total: $6,584bn
Trang 6$11.3 trillion This follows at 12.6% fall in the previous year.
Independent managers accounted for around a half of total assets of the
largest 500 fund managers in 2008, with the remainder split equally
between insurance companies and banks The concentration of the
industry has grown over the past decade The largest 20 fund managers‘
share of top 500 assets increased to 38% in 2008 from 30% a decade
earlier
There has been a rise in m&A activity in the fund management industry
over the past two years Asset management firms have reduced the
number of mutual funds and products they offer in a bid to reduce costs
and many funds have been merged or liquidated A major trend has been
one of bank divestment of asset management subsidiaries This is partly
due to regulation changes which affect banks by setting limits on
speculative trading with shareholders’ funds as well as restrictions on
owning or investing in hedge funds and private equity funds Asset
management arms of some banks have also been sold in order to raise
capital In the coming years the industry may see more traditional asset
managers being bought by alternative players such as hedge funds or
sovereign wealth funds
In June 2009 Barclays Global Investors accepted BlackRock’s $13.5bn
offer, making this the second largest asset management deal ever and
creating the world’s largest fund manager other mergers included the
purchase of Fortis Investments by BNP Paribas, Societe Generale Asset
management by credit Agricole, Sal oppenheim Jr & cie S.c.A by
Deutsche Bank AG, New Star Asset management by Henderson and
Societe Generale Asset management UK by GLG Partners
Asset allocation varies considerably around the world In the UK, US and
Australia (chart 13), the proportion of funds invested in equities has
generally been higher than in other countries although exposure to equities
has been declining for a number of years in favour of more diversification
more risk appetite in 2009 however encouraged investors to invest more in
equity markets, overseas markets and alternative investments reversing
the previous year’s trend UK investors held on average of 46% of their
portfolios in equities in 2009 (Table 6), up from 41% in the previous year
Fixed income allocation on the other hand fell to 36% from 39% over the
year
Institutional investors are likely to remain more cautious in the next couple
of years, allocating less to equity markets than in previous years while
continuing to increase the diversification of their portfolios both in terms of
assets and geographical regions There has been a shift over the past year
from actively managed funds to passive investing due to high manager
fees and poor performance This is likely to continue as investors search
for better returns in relation to costs The use of low-cost passively
managed products such as ETFs is likely to continue growing
Source: UBS Asset Management
Chart 13 Asset allocation in major pension markets
% share, 2009
0 20 40 60 80 100
Other Bonds
Equities
Australia Canada
UK Japan US
42%
19%
40%
34%
26%
54%
36%
10%
17%
47%
36%
7%
35%
58%
39% Source: P&I/Tower Watson World 500
Chart 12 Assets of 500 global managers
% share, 2008
US Others
Japan Germany
France Switzerland
UK
8%
6%
20%
8%
5%
11%
42%
Total: $53.4 trillion
1 acquired by BlackRock in 2009 Source: Pension & Investments / Tower Watson World 500
Barclays Global Investors 1 Allianz Group
State Street Global Fidelity Investments AXA Group BlackRock Deutsche Bank Vanguard Group J.P Morgan Chase Capital Group Bank of New York Mellon UBS
BNP Paribas Goldman Sachs Group ING Group
1,516 1,462 1,444 1,389 1,383 1,307 1,150 1,145 1,136 975 928 821 810 798 777
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Table 3 Largest global investment managers
UK Germany US US France US Germany US US US US Switzerland France US Netherlands assets under management,
end-2008, $bn
Trang 7UK FUND MANAGeMeNT
UK fund management overview The UK fund management industry
was responsible for £4.1 trillion of funds at the end of 2009 (Table 4,
charts 14 and 15), up 12% during the year and just slightly below the
record amount under management two years earlier The increase during
the year was primarily a result of the equity markets recovery and an
increase in retail inflows The recovery in 2009 follows a 12% decline in
the previous year
The international orientation of the UK’s fund management industry is
reflected in the presence of a broad range of UK and foreign-owned firms,
in the significant investment in overseas securities, and in the
management of overseas clients’ assets over 30% of funds under
management in the UK, or some £1.4 trillion, are from overseas
(charts 16 and 17) London is central to the UK’s strong international
position Edinburgh and Glasgow are also important centres for fund
management There are also significant funds managed by UK fund
managers outside the UK as some firms choose to delegate to overseas
offices the management of UK funds The ImA estimates that a further
£17.3 trillion is managed globally by asset management firms operating in
the UK
The UK has been a beneficiary of the globalisation of the fund management
industry It has however lost market share as a domicile for funds over the
past decade According to the ImA, the total assets of funds domiciled in
Luxembourg and Dublin were just under twice those domiciled in the UK
ten years ago In 2009 they were four times as much over £700bn
in overseas domiciled funds were managed in the UK in 2009 Around 80%
of this was for funds domiciled in Luxembourg and Dublin, and most of the
remainder in the channel Islands and cayman Islands The proposed
Alternative Investment Fund managers Directive (AIFmD) and reforms of
banking regulation are likely to influence the fund management sector both
in the UK and internationally in the coming years International concern
has been expressed on the marketing provisions of the AIFmD which could
effectively prevent non-EU funds and managers from accessing the EU
market and thus prevent EU investors from investing outside the EU
The figure of £4.1bn for assets under management in the UK represents a
conservative estimate It does not take into account significant funds
managed in the UK for which there are no available estimates such as
funds managed on behalf of sovereign wealth funds as well as private
client funds managed, for example, by family offices
Client type Institutional clients account for the bulk of funds under
management in the UK The UK’s strong international position as a fund
management location means that significant institutional funds from
overseas are managed there Retail and private clients generate the
remaining funds
Institutional clients in the UK accounted for around two-thirds of funds
under management in 2009 Institutional clients include insurance funds,
pension funds, local authority and charity funds:
- Insurance funds UK insurance funds totalled £766bn in 2009, slightly
up on the previous year This represented close to a fifth of funds
1 Pension funds and insurance companies assets include investments in unit trusts
Source: ONS
£bn
Chart 15 Annual net investment by UK institutional groups 1
-30 -20 -10 0 10 20 30 40 50
2009 2008 2007 2006 2005 2004 2003 2002 2001 2000
Self-administered pension funds
Unit and investment trusts
Insurance funds
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500
2009 2008 2007 2006 2005 2004 2003 2002 Source: TheCityUK estimates based on IMA, ONS, ComPeer, Eurohedge, BVCA and IPD data
£ bn
Chart 14 Growth of funds under management
in the UK
Institut funds Retail funds Alter funds Private clients
Managed by IMA 1 member firms 2 Institutional clients
- insurance companies
- corporate pension funds
- other (local authorities, charities, etc.) Retail clients
Other funds 3
- Hedge funds
- Property funds
- Private equity funds Private client funds Total funds under management in the UK
£bn
Table 4 Funds under management in the UK
2008 2,982 2,395 761 898 736 587 345 130 135 80 335 3,662
1 Investment Management Association; 2 Excluding private clients; 3 Figures have been adjusted to take account of double-counting
Source: IMA, ComPeer, Eurohedge, BVCA, IPD, TheCityUK estimates
2009 3,360 2,643 766 959 865 717 345 190 130 80 402 4,110
Trang 8
under management in the UK Around 90% of insurance investment
funds are from long-term insurance policies in which premiums paid
over many years are invested by insurance institutions in order to
meet the liability at maturity The remainder are from general
insurance policies which have a shorter timescale Around 80% of
insurance clients’ assets are managed by in-house asset management
subsidiaries, although third-party insurance asset management is on
the increase
- Pension funds’ assets increased by 7% in 2009 to £959bn The UK
pension fund industry has been affected in recent years by various
factors such as changes in regulation and accounting standards and
the continuing shift from defined benefit to defined contribution
schemes Increasing costs have resulted in the closure of many private
sector DB schemes: membership of such open DB schemes has
therefore halved to 2.6m since the early 1990s contributions to Dc
schemes that have replaced them, at 9% of salary, are only about half
that to DB schemes
- ‘Other institutional’ category includes a wide range of clients such
as corporations, asset gatherers, local authority, sovereign wealth
funds, charity, etc The considerable growth of this category to a
record £865bn in 2009 is a reflection of an increase in international
business from governments, corporate non-pension business, and
central banks
Retail clients held some £717bn in investment funds managed in the UK
in 2009, up nearly a quarter on the previous year largely due to an
increase in retail investment in corporate bond funds and absolute return
funds The overall figure for investment funds managed in the UK is around
£1 trillion as some products are sold to a range of institutional clients UK
based investment funds consist of:
- UK domiciled funds including unit trusts and open ended investment
companies (oEIcs), investment trusts and other retail products Funds
under management of UK authorised retail funds increased by a third
in 2009 to £481bn, more than making up the 23% decline in the
previous year (chart 18) market movements were responsible for
Source: Investment Management Association
£bn, funds under management (bars)
Chart 18 UK domiciled retail funds under management
0 100 200 300 400 500
2009 2008 2007 2006 2005 2004 2003 2002 2001
5 10 15 20 25
£bn, net retail sales (line)
Funds under management in Scotland
According to the Scottish Financial Enterprise, funds managed by the Scottish
investment management industry totalled £685bn in 2008 A third of the funds
invested by Scottish managers are long term life assurance funds with a further
third in pension assets mutual funds and private and charitable funds make up
most of the remainder Scotland has a traditional strength in pensions and the
management of long-term savings, including open and closed-end mutual funds
Source: Investment Management Association
% share
Chart 17 Assets under management in the UK
by region of group headquarters
0 10 20 30 40 50 60 70 80 90
Europe
North America
UK
2009 2008
59%
2%
9%
42%
47%
1%
11%
29%
Source: TheCityUK estimates based on IMA, Compeer, Eurohedge, ONS, BVCA and IPD data
% share of UK funds, end-2009
66%
28%
UK clients
Overseas institutional and retail clients
Chart 16 Assets managed in the UK by domicile
Overseas private clients and alternative funds 6%
Total: £4,110bn
Advantages of the UK as a centre for fund management
- Highly sophisticated and innovative management styles, techniques and
strategies;
- Skilled labour force and high quality professional and support services;
- wide ranging client base: private and institutional, UK and overseas;
- Highly liquid securities market with the opportunity to trade in large blocks of
shares;
- History of openness with relatively easy access to markets;
- Liberalised operating environment combined with protection against abuses;
- competitive infrastructure in telecommunications services and airline links;
- A proportionate regulatory regime that is effective, fair and focused on the
future, principled and risk based
Trang 9three-quarters of the increase in funds, with new money accounting
for the remainder Funds under management increased further in the
first 7 months of 2010 to £509bn (chart 19)
- UK managed funds domiciled outside the UK totalled around £500bn
at the end of 2009, including funds such as UcITS and ETFs marketed
to retail investors A number of firms have significant retail operations
where the assets are largely managed in the UK but with domicile in
Luxembourg, Dublin and other overseas locations
Private clients are a significant niche in the UK market, with assets of
around £402bn at the end of 2009, up a fifth on the previous year This
figure includes assets managed by private client firms such as stockbrokers
and private client departments of banks and fund managers Latest
available data shows that individual ownership of UK shares accounted for
around 10% of total share ownership in 2009, down from 16% in 2000 and
21% in 1990 Although the proportion of equity held by individuals is lower
than in some other countries, the greater UK market capitalisation implies
a more significant penetration of individual share ownership
Alternative funds include hedge funds, property funds and private
equity funds Both institutional clients and private clients invest in such
funds Adjusting for double-counting, alternative funds were the source of
an additional £400bn in 2009 or 10% of UK funds under management The
UK accounts for around a third of the European property funds market
London is also Europe’s leading centre for managers of hedge funds In
2009, over three-quarters of European-based hedge funds’ assets were
managed out of London Including US hedge funds with an office in Europe,
London probably accounted for 90% of European hedge fund assets The
UK is Europe’s leading centre for managers of private equity funds with
more than a half of European assets managed in London
Overseas clients and firms In recent years, the UK has consolidated its
position as one of the most important centres for the management of funds
on behalf of foreign clients Funds in the UK managed on behalf of
overseas clients totalled around £1.4 trillion in 2009 or a third of the UK
total (chart 16) This was twice the total a decade earlier due to growth in
the client base and consolidation which has been reflected in some large
acquisitions Institutional and retail clients were the source of around 80%
of overseas clients’ funds, while the remainder came from private clients
and alternative funds
A significant number of overseas firms are operating in the UK They
accounted for over a half of UK funds under management in 2009 most of
these funds are managed by firms with North American headquarters
(around three-quarters of the overseas total), with Europe accounting for
the bulk of the remainder (chart 17) The large increase in overseas
companies’ share of UK funds under management in 2009 was largely are
result of a number of divestments by UK retail banks and the BlackRock
Barclays Global Investors deal
Manager type UK fund management organisations can be classified by
manager type into (chart 20):
- Fund managers include independent investment managers that are
not linked to any UK-based banking, securities or insurance groups
They managed a third of UK funds, mainly pensions, at end-2009;
Source: Investment Management Association
BlackRock Investment Management Legal & General Investment Management State Street Global Advisors
M&G Investments Scottish Widows Investment Partnership JPMorgan Asset management
Aviva Investors Standard Life Investments Schroder Investment Management Insight Investment Management
£bn 462 306 183 166 142 138 132 108 97 88
1 2 3 4 5 6 7 8 9 10
Table 5 Largest firms by UK funds under management
UK assets under management, end-2009, £bn Source: IMA, TheCityUK estimates
% share of UK funds, end-2009
35%
30%
Insurance companies
Retail banks
Pension fund managers, 3%
Fund Managers
Chart 20 Assets managed in the UK by manager type
Other
Investment banks
14%
14%
4%
Total: £4,110bn
1 First 7 months of 2010 Source: Investment Management Association
£ bn, assets managed by UK domiciled investment funds
Chart 19 UK investment funds assets under management
300 350 400 450 500 550
2010 2009
2008
Trang 10- Insurance companies Insurance companies managed around 30%
of total funds in the UK at the end of 2009 Two-thirds of funds
originated from their clients and most of the remainder from pension
funds Around four-fifths of insurance companies’ funds are either
managed by their internal investment department or by a separate
subsidiary which might manage funds of external clients as well as
those of its parent company The remaining funds are outsourced to
third-party asset management firms;
- Retail and investment banks represent banking and securities
groups some of which combine securities and fund management
operations Retail and investment banks accounted for 4% and 14%
respectively of UK funds at the end of 2009 Investment banks’ funds
predominantly came from pension assets while retail banks’ funds
originated from both insurance and pension assets equally;
- Self-managed pension funds represent separate legal entities set
up to manage a company’s pension fund assets Their share has
fallen in recent years as companies’ pension funds are increasingly
managed by third-party fund managers In 2009, UK self-managed
pension funds held around 3% of assets under management
Largest UK fund management organisations The UK market is
relatively concentrated at the top end with the largest five fund managers
accounting for 37% of total funds under management in 2009 (up from
31% in 2008), and the top ten managers for 54% (up from 48%)
(chart 21) BlackRock Investment management was the largest firm with
£462bn of funds under management in the UK at the end of 2009 It was
followed by Legal & General and State Street Global Advisors (Table 5)
Asset allocation Fund managers have an array of investment choices
available to them at home and overseas including equities, bonds,
property, and cash Some 42% of UK institutional funds were invested in
equities at the end of 2009 (Table 6, chart 22), up from 37% in the
previous year The last ten years have however seen a reduction in
portfolio allocation to equities As some pension funds are facing a deficit
there is a heightened awareness of risk Allocation to UK Government
bonds accounted for 39% of assets in 2009, down from 42% in 2008 The
shares of cash and property investments were practically unchanged in
2009 at 11% and 5% respectively The use of derivatives as a means of
facilitating the transfer of risk and implementing tactical asset allocation
decisions has become a common feature of many fund managers
close to 80% of UK institutional assets were managed actively at the end
of 2009 Third-party insurance and in-house insurance had the largest
proportion of active management (around 90%), while corporate pension
funds (around 65%) had
the smallest proportion
(chart 23)
CONTribUTiON TO The
UK eCONOMy
Value added while there
is no official figure for the
contribution of fund
% share, end-2009
Chart 23 Active versus passive management
0 20 40 60 80 100 Total Institutional
Other Institutional In-House Insurance Third-Party Insurance Sovereign Wealth Funds
Charity Local Authority Corporate pension fund
Pasive Active
Source: UBS Asset Management
% share
Chart 22 Asset allocation of UK pension funds
0 10 20 30 40 50 60
2009 2000
1995 1990 1985 1980
UK equities
Property Cash
Government bonds
Overseas securities Source: IMA
% share
Chart 21 Market share of largest asset management firms
0 10 20 30 40 50
2009 2008
2002
Source: IMA
Table 6 Asset allocation in the UK by institutional client type
Equities Bonds Cash Property Other
Corporate Pension Fund 40.8 41.7 4.0 3.1 10.4
Insurance (In -House) 32.0 51.1 8.6 6.5 1.8
Insurance (Third -party) 45.1 36.7 7.0 4.5 6.8
% share of total assets under management,
66.8 10.9 18.2 2.1 2.0
Total
45.8 35.5 9.5 4.5 4.7