UK assets under management up 20 per cent to hit £6.9trn

Assets under management in the UK increased by 20 per cent in 2016 to a record £6.9 trillion (£5.7trn in 2015), according to the Investment Association’s first annual Asset Management Survey since a majority of the UK voted to leave the EU.

On average, assets under management have grown by 8 per cent per year in the last 10 years.

The exceptional growth witnessed in 2016 largely reflects an increase in the value of overseas assets, which benefited from the weakening of sterling versus all other major currencies following the Brexit referendum in June.

£2.6 trillion is managed in the UK on behalf of overseas investors (£2.2 trillion in 2015). Over 50 per cent of this is managed for non-UK European clients (£1.4 trillion) further cementing the UK’s position as the largest asset management centre in Europe and the second biggest global asset management centre after the US.

Now in its 15th year, the survey shows the UK asset management industry is 373 per cent the size of the UK’s GDP.

At almost 4 times the size of the UK economy, the significance of asset management to the UK is clear when compared to other European countries, where the average value of assets under management is close to 100 per cent of local GDP.

The importance of the industry to the UK economy is illustrated though the investment they direct towards UK companies, property and infrastructure, the impact they have on the wealth of individuals as they manage their pensions and investments, and the earnings asset managers bring to the UK from overseas clients.

Chris Cummings, IA CEO, said: “The asset management industry has again experienced a year of strong growth confirming the UK’s place at the forefront of a competitive global market. As an industry, we are responsible for looking after the pensions and investments for millions of savers. We act as the stewards of the UK economy and we work hard to ensure good corporate governance. We recognise the responsibility we carry and the trust invested in us by the investing public.

“Our members help finance UK companies to power the wheels of innovation and increase productivity. As investors, we take an on-going interest in the long term strategic health of the businesses we invest in and hold the management of those firms to account.This year’s report also sees an increasing focus on infrastructure investment, supporting the delivery of essential social housing, healthcare and environmental projects at the heart of communities right across the UK.”

Currently, 93,500 people are employed in activities related either directly or indirectly to asset management, with 37,700 are directly employed by asset management firms.

At the end of 2016, £840 billion was invested via asset managers in UK shares, £500 billion in sterling corporate bonds and £160 billion in UK commercial property.

£29 billion was invested in infrastructure. Three quarters of this (73 per cent) was directed to economic projects, such as solar and wind farms and the remaining quarter (27 per cent) to social infrastructure such as hospitals and social housing projects.

The value of investments by UK investors in retail funds reached a record £1 trillion by the end of 2016.

Retail flows were significantly lower than in recent years as net investment by UK investors fell to £4.7 billion.

The preference for outcome-focused funds which has been prevalent in recent years, continued with inflows of £8.7 billion during 2016. Equity and property funds in comparison saw outflows of £8 billion and £2 billion respectively, most of which occurred in the weeks directly after the referendum in June.

The introduction of automatic enrolment in the UK has led to millions of new pension savers and pension funds remain the industry’s largest client type, at 44 per cent of assets, up from 34 per cent a decade ago.