Assets under management held by Investment Association members reached a milestone £10 trillion in 2021, according to the latest Investment Management Survey, the annual assessment of the state of the industry.
While the 6% year-on-year increase comes despite the first quarter lockdown, supply chain disruptions and growing inflation in the second half of the year, and is a mark of the resilience of the industry, it is below the average growth rate seen over the last ten years.
The UK continues to be a leading centre for investment management, second only to the United States internationally. At the end of 2021, total assets managed for overseas clients had risen to £4.6 trillion from £4.2 trillion in 2020. This represents 46% of total assets under management, a nine percentage point increase since 2016, suggesting the UK is becoming increasingly more attractive for overseas investors.
The growth of funds under management with responsible investment criteria was again a standout trend in 2021, rising by £34 billion to £89 billion by the end of the year – a 62% increase. While customers continued to be attracted to sustainable investing, they also continued to turn away from UK equities, as part of a longer-term shift to more globally diversified portfolios. Funds under management in UK equities have fallen to 13% in 2021, down by 25 percentage points since 2006. Assets under management show a similar picture, largely driven this year by a surge in North American equities which, for the first time, accounted for the largest share of total equity assets at 30%.
The growth of indexing strategies slowed in 2021, with assets in indexing strategies reaching 32% of total assets in 2021 – a 1% increase year-on-year following a 10% increase over the decade since 2011. In the retail fund market, actively managed funds outsold index trackers for the first year since 2017 with inflows of £25 billion compared to sales to index tracking funds of £18 billion.
In 2021, institutional clients, such as pension funds, continued to account for the majority of investment management industry clients, responsible for 77% of assets under management in the UK. However, 2021 also saw the acceleration in assets managed on behalf of retail clients – from 20% in 2020 to 22% in 2021. This small increase comes after a decade of very little movement.
Chris Cummings (pictured), Chief Executive of the Investment Association, said:
“Reaching the milestone £10 trillion assets under management is a testament to the strength and resilience of the UK investment management industry during a challenging period. Responsible investment has been a key feature of this growth over the last two years, as investors increasingly look to marry their financial and their sustainability goals. UK investment management also continues to be a globally competitive industry, attracting more and more overseas clients, who are drawn to the UK as a centre of excellence for fund management.
“However, with the war in Ukraine, rising inflation and energy prices creating very turbulent market conditions so far in 2022, we are unlikely to see the growth in assets under management continue at the same pace as we have in recent years. As people balance the very real competing demands of saving for their future and the rising costs of their day-to-day living, the role of investment managers to guide savers to help reach their financial goals, will be more crucial than ever.”
The IMS also found that the industry employed 122,000 people in the UK at the end of 2021. Three quarters of those people work in London, while 19% work in Scotland and 5% work in the rest of the UK.
In 2021, assets managed from Scotland reached £700 billion, equivalent to 7% of total AUM.