Banking

Investment management AUM grows to £9.4trn despite tumultuous 2020

The annual assessment of the state of the industry found that total funds under management for UK investors also saw an 11% increase year on year, reaching £1.4 trillion in 2020. The recovery and resilience of the industry’s recovery through the Covid-19 pandemic has been attributed to quick adaptation to home working, a focus on delivering for customers, and crucial interventions from the central banks.

Chris Cummings, chief executive of the Investment Association said: “The investment management industry demonstrated its long termism through the pandemic by supporting the companies it invests in. The swift action of the central banks supported the global economy and the industry rallied to the cause injecting over £22bn into businesses to help them ride out the storm.”

 The UK is also an attractive hub for oversea investors. By the end of 2020, overseas client assets accounted for 44$ of total AUM, equivalent to £4.2 trillion.

The UK remains the second largest investment management centre in the world behind the United States. It is also the largest investment management centre in Europe with a market share of 37% which is larger than the combined total of France, Germany, and Switzerland.

Another key development of 2020 includes significant growth in assets managed according to responsible investment criteria.

As 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 which is up from 37% compared to 2019.

In 2020, the proportion of assets subject to sustainability criteria almost doubled in 2020 to 2.6% of total assets.

Meanwhile, retail investors appetite for environmentally conscious funds also saw a rise, as net retail sales to responsible investment funds reached £11.7 billion, a third of overall sales. Funds under management in responsible grew by 60% over 2020, pushed higher by strong sales and new fund launches.

“But the pandemic wasn’t the only story of 2020,” added Cummings. “We also saw the acceleration towards a greener economy as retail investors placed record funds into responsible and sustainable investments, seeing a new generation embracing investing. With the final transition out of the EU completed, the industry is well-set to build on its world class reputation which has already led to it managing £9.4trn of international clients’ funds.”

In March 2020 the equity and bond markets badly hit asset valuations globally and UK investor FUM fell 1.1%. Although as central banks acted, a swift recovery followed.

However, the blow did leave UK equity valuations lagging in other major markets including the US.

AUM in UK equities continued to fall in 2020 which is down three percentage points from 2019, reaching a record low of 26%, while North American equities have grown to account for 23% of equities in 2020.

The fall in UK equities 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.

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