The UK is the second largest fund management market after the US and by far the biggest centre in Europe. London, however, continues to be the leading centre for international fund management with over a third of its funds under management.
In 2008 UK assets under management fell 12 per cent to £3.7 trillion, according to the annual Fund Management report by International Financial Services London (IFSL), the independent organisation promoting UK financial services worldwide.
The decline follows five successive years of growth, averaging eight per cent per year. Poor investment performance, reduced inflow of new funds and investor redemptions all contributed to the fall in assets over the past year. Early indicators for 2009 show that the industry has started to recover with a 14 per cent gain in assets of UK domiciled retail funds in the first seven months of the year.
According to IFSL’s report, institutional funds were the source of two-thirds of UK funds under management in 2008. Around 16 per cent came from retail funds, 9 per cent from alternative funds and the remainder from private clients.
Marko Maslakovic, Senior Economist at IFSL said: “Profit margins among fund managers in the UK declined from 32 per cent to 23 per cent in 2008 as revenues fell faster than costs. Profitability is likely to remain at lower levels in 2009 as market conditions including reduced asset values, increased competition for new business and investor shift to lower revenue asset classes persist.”
Global trends: Worldwide conventional investment management assets fell 19 per cent in 2008 to $61.6 trillion (see Table below). The decline reported in US dollars was exacerbated by the strengthening of the US dollar during the year. Pension assets accounted for $24.0 trillion of the total, with a further $18.7 trillion invested in insurance funds and $18.9 trillion in mutual funds. Together with alternative funds and private wealth funds, assets of the global fund management industry amounted to around $90 trillion.
Stephen Wright, IFSL’s Chief Executive, noted: “The UK is the second largest fund management market after the US and by far the biggest centre in Europe. London however continues to be the leading centre for international fund management with over a third of its funds under management originating from overseas.”
© IFSL - International Financial Services London
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