U.K. Fund Managers’ Impact Assessed07.26.2016
Asset managers contributed £61bn ($80bn) of new funds to UK businesses in 2014 according to a study commissioned by The Investment Association, ahead of the results of a regulatory review of the industry.
The Investment Association, which represents asset managers in the UK, commissioned consultant Oxera to assess the contribution of long-only asset managers to the UK economy. The study said that £61bn was equivalent to a third of total UK business investment of £169bn in 2014.
The consultancy found that asset managers purchased between 60% and 70% of total new corporate bond issuance in recent years and around 40% of total equity capital for initial public offerings, rights issues and placings. “This funding contribution in equity markets is in excess of overall ownership, which stands at around a third of domestic market capitalisation,” added the report.
Oxera said total assets under management in the UK that reached £5.5trn in 2014, more than triple the country’s GDP and the number of people employed directly employed by the industry was 95,000 across Europe and 35,000 in the UK with indirect employment at 410,000 in Europe and 60,000 in the UK.
“A 2014 study found that the gross value added of the European fund management industry represents 0.35% of European GDP, based on the industry’s profits, staff costs and taxes paid,” added Oxera. “In the UK, this figure is estimated to be closer to 1.0%, in part reflecting the international nature of the UK as an asset management services centre.”
The Investment Association released the study in the midst of the Financial Conduct Authority’s first competition market study into the asset management industry which it launched last November. The terms of reference include whether asset managers compete to deliver value, whether asset managers are willing and able to control costs and quality along the value chain and how investment consultants affect competition for institutional asset management and whether there are any barriers to innovation and technological advances.
When it launched the review the FCA said it was concerned that investors may not be able to assess whether they are getting value for money; asset managers may not have sufficient incentives or the ability to control investors’ costs; and that the bundling of some ancillary services may impact the way competition works for these services. The FCA said it aims to publish a final report with potential remedies early next year.
In April this year the FCA said the first results from the thematic review showed that a number of asset managers have failed to disclose closet tracker funds, while others did not have clear descriptions of funds.
Last month the FCA also hired Daniel Godfrey, the former head of the Investment Association, as a consultant. He allegedly left the trade body over disagreements on how fund managers should disclose fees.
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