UK investment management industry retains international position despite fall in AUM

FOR IMMEDIATE RELEASE  

10 October 2023   

Assets under management for the UK investment management industry have fallen to £8.8 trillion in 2022 - according to Investment Association’s (IA) latest Investment Management Survey, the annual assessment of the state of the industry. In what was a turbulent twelve months, characterised by significant political and economic uncertainty owing to the war in Ukraine, rising inflation leading to a cost-of-living crisis, and multiple changes at the top of British politics, the markets experienced an unusual correlation in the direction of travel for both global equities and bonds.  

Despite this, the UK investment management industry remained an international success story. Alongside the £4.6 trillion managed for UK retail and institutional investors, a further £4.2 trillion (48% of assets managed in the UK) is managed on behalf of overseas investors. This is an ongoing testament to global recognition of the high-quality products and services provided by UK investment managers. £2.4 trillion, equivalent to 56% of those assets, was managed on behalf of European customers (excluding UK), followed by £845 billion on behalf of North American customers. An increasing proportion was managed on behalf of Asian customers, representing 16% of assets under management (£680 billion). 

2022 also saw a number of notable trends and developments:  

• While institutional clients, such as pension funds, constitute the majority of investment management industry clients, retail customers now hold nearly a quarter (24.7%) of assets under management. Some of this increase reflects different asset exposure leading to different market outcomes through 2022, but it also reflects wider retail participation as individuals’ appetite for investing grew during the coronavirus pandemic. This is an increase from 22% in 2021, and 20% in 2020 following little change in previous years, and represents £2.2 trillion.    

• The turbulence within the UK gilt market created an acute and highly unusual set of difficulties for UK pension scheme investment and for wider UK financial stability through September to October. As such, LDI strategies came under significant pressure in 2022 and were down 28% year-on-year on a matched basis.  

• Responsible investment funds were not immune to the challenging conditions of 2022, with growth slowing and these funds experiencing a more modest £5.4 billion inflow, down from £15.9 billion in 2021. The evolution of sustainable and responsible investment will be a key theme shaping the future of the UK investment management industry.  

• Total investments in the UK reached £1.4 trillion, across equities, bonds, infrastructure and property investment. However, the decline in investment in UK equities continued at pace with £12 billion taken out of UK equity funds in 2022, double the outflow of the previous year.  

Chris Cummings, Chief Executive of the Investment Association, said:  

“2022 saw a perfect storm of unprecedented events which impacted UK households and the economy. The investment management industry, like many others, was affected and we saw a significant fall in assets under management, reflecting the challenging economic environment.  

“Despite the turbulent conditions, investment managers have first and foremost, continued to provide for their clients, helping households across the UK meet their long-term financial goals. The UK investment management industry also remains a global success story, with our products and services highly valued by customers around the world. 

“However, these difficult conditions are set to continue for the foreseeable future, and it is crucial that our industry works together with Government and regulators, so the UK retains its position as a leading centre for investment management. Ultimately, a competitive, forward-looking regulatory framework that supports innovation will enable our industry to deliver the best solutions to our customers and the UK economy.” 

Within the investment management industry in the UK, an approximate 46,200 people are directly employed by investment management firms. Despite the overall fall in assets under management in 2022, direct employment increased 3% year-on year. The industry also provides indirect employment through supporting industries such as custodian banks, transfer agents, and law firms - and this accounts for a further 80,200 jobs.