How did investment management fare during a tumultuous 2020?
In September we published the annual assessment of how the investment management sector performed in the last year. The survey captures investment management undertaken by members of the Investment Association (IA) on behalf of domestic and overseas clients. In all we received responses from 74 member firms, who between them manage 85% of total UK assets under management across the entire IA membership base.
The IMS found that assets under management held by IA members grew to £9.4 trillion in the UK by the end of 2020, an increase of 11% on the previous year. Total funds under management (FUM) for UK investors have also seen a 9% increase year on year, reaching £1.4 trillion in 2020. Quick adaptation to home working, a focus on delivering for customers, and crucial interventions from the central banks were all key aspects of the industry’s recovery and resilience through the Covid-19 pandemic.
The UK remains the second largest investment management centre in the world behind the United States, and by far the largest investment management centre in Europe with a market share of 37%. The UK’s share of the European market is larger than the combined total of France, Germany and Switzerland. The UK also remains an attractive hub for overseas investors. By the end of 2020, overseas client assets accounted for 44% of total AUM (equivalent to £4.2 trillion). The growth in assets managed according to responsible investment criteria is one of the standout developments of 2020. The green agenda continues to rise in prominence and investment managers have committed to support the transition to net zero emissions. 49% of total assets managed by IA member firms apply ESG integration, up from 37% in 2019. The proportion of assets subject to sustainability focused criteria almost doubled in 2020 to 2.6% of total assets.
Retail investor appetite for environmentally conscious funds has been building over recent years but the pandemic brought social concerns to the fore, as net retail sales to responsible investment (RI) funds accelerated through 2020 to reach £11.7 billion, a third of overall sales.
If you’d like more information please email Sarah Shehabi: sarah.shehabi@theia.org
The survey is available to download here.
FUM in responsible investment funds grew by 60% over 2020, pushed higher by strong sales and new fund launches. The percentage of UK investor FUM in RI funds remains small but growing at 3.9% - up from 2.6% at the beginning of 2020. March 2020’s market contraction in the equity and bond markets badly hit asset valuations globally and UK investor FUM fell 11% over March alone. A swift recovery followed as central banks took decisive action to calm markets.
However, the recovery in UK equity valuations has lagged other major markets, including the US. AUM in UK equities continued to fall in 2020 - down three percentage points from 2019, reaching a record low of 26%, whilst North American equities have grown to account for 23% of equities in 2020. The fall in UK equities also reflects the long-term trend of higher allocation to globally diverse equity and bond strategies. Three quarters of equity assets are now invested overseas compared with just over 50% ten years ago and assets in overseas bonds are 55% of all bond AUM in 2020. The IMS also sets out detail on the key themes from 2020, including; the continued growth in responsible and sustainable investing, the growth in private markets, and how the industry has adapted to the post-Brexit landscape.