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1、INVESTMENT MANAGEMENT IN THE UK 2021-2022The Investment Association Annual SurveySeptember 20222CONTENT ENQUIRIESSarah Shehabi,investmentassociation.surveytheia.org CONTRIBUTORSSarah ShehabiEvan Grace FrenkelRichard HaleMiranda SeathJonathan LipkinThe Investment Association(IA)Camomile Court,23 Camo
2、mile Street,London,EC3A 7LL www.theia.orgInvAssocSeptember 2022 The IA(2022).All rights reserved.No reproduction without permission of the IA.3INVESTMENT MANAGEMENT SURVEY 2021-22|CONTENTSCONTENTSIndex of Charts,Figures and Tables 5About the Survey 8Survey Foreword 10Executive Summary 121.UK INVESTM
3、ENT MANAGEMENT INDUSTRY:A GLOBAL CENTRE 14 Role of Investment Management 15 Size of UK industry 16 Scotland as a major centre 18 Scale of wider industry 19 UK investment management in European and Global Context 20 Overseas client market 21 Services to overseas funds 22 Importance to UK service expo
4、rts 232.KEY THEMES IN A MORE UNCERTAIN WORLD 24 1.Navigating a difficult economic environment 25 2.Investing responsibly and sustainably 26 Sizing the market for sustainable and responsible investment 28 Improving disclosure 30 3.Ongoing focus on private markets 31 4.Accelerating pace of operational
5、 modernisation 34 5.Opportunities for growth 36 6.Enhancing diversity&inclusion across the sector 393.TRENDS IN CLIENT ASSETS AND ALLOCATION 40 Client types 41 Segregated vs.pooled 42 Trends in asset allocation 43 Detailed asset allocation 44 Equities by region 44 Fixed income assets by region 44 In
6、vestment in UK infrastructure 45 Growth of indexing strategies 47THE INVESTMENT ASSOCIATION44.UK INSTITUTIONAL MARKET 50 Market overview 51 Client breakdown 51 Evolution of pension market 52 Sizing the market 53 Trends in the third party institutional market 55 Mandate breakdown 56 Investment trends
7、 within single-asset mandates 58 Active vs.indexing 61 Segregated vs.pooled 615.UK RETAIL MARKET 62 UK investor funds under management 64 Long-term asset allocation 65 Long-term sales trends 66 Net retail sales through 2021 67 Inflation:drivers and the implications for the fund market 68 Responsible
8、 and sustainable investment 70 Index tracking funds 72 Sales trends by asset class 73 Sales to outcome and allocation funds 79 Property funds 80 Fund of funds 81 Industry concentration 84 The UK in the context of the European funds market 856.OPERATIONAL AND STRUCTURAL ISSUES 89 Revenue and costs 90
9、 Employment in the investment management industry 91 Industry concentration 95 Investment manager ownership 98APPENDICES 1.Summary of assets under management in the UK 100 2.Summary of data from the UK institutional market 102 3.Notable M&A deals in the UK investment management sector(2009-June 2022
10、)104 4.Definitions 113 5.Survey and interview participants 1155INVESTMENT MANAGEMENT SURVEY 2021-22|INDEX OF CHARTS,FIGURES AND TABLESINDEX OF CHARTS,FIGURES AND TABLESCHARTSChart 1:Total assets under management in the UK and in UK Funds(2007-2021)18Chart 2:UK-managed assets by UK regional headquart
11、ers(2011-2021)19Chart 3:Change in proportion of UK and overseas clients(2016-2021)21Chart 4:Change in proportion of assets managed for UK and overseas funds(2016-2021)22Chart 5:Export earnings of fund managers and contribution to services exports(1996-2020)23Chart 6:Proportion of assets under manage
12、ment by responsible investment category(2019-2021)28Chart 7:Global assets under management in private markets(2006-2021)31Chart 8:Number of UK listed companies over four decades(1976-2021)32Chart 9:Assets managed in the UK by client type in 2021 41Chart 10:Assets managed in the UK by client type(201
13、1-2021)42Chart 11:Segregated vs.pooled investment(2011-2021)42Chart 12:Overall asset allocation of UK-managed assets(2011-2021)43Chart 13:UK-managed equities by region(2011-2021)44Chart 14:Allocation of UK-managed fixed income assets by type and region(2011-2021)45Chart 15:Indexing strategies as pro
14、portion of total UK assets under management(2011-2021)47Chart 16:ETF assets under management by region of domicile(2011-2021)48Chart 17:Active ETF assets under management(2011-2021)49Chart 18:Increase in sustainable and responsible investment options in ETFs(Q4 2018 Q4 2021)49Chart 19:UK institution
15、al market by client type in 2021 51Chart 20:UK institutional market by client type(2011-2021)52Chart 21:Pension participation for private sector jobs(2011-2021)54Chart 22:DC members by scheme type in 2021 55Chart 23:Third party UK institutional client market by client type in 2021 55Chart 24:UK thir
16、d party institutional mandates including LDI in 2021 56Chart 25:Notional value of LDI(2011-2021)56Chart 26:UK third party institutional client mandates:multi-asset vs.specialist in 2021 57Chart 27:UK third party institutional client mandates:multi-asset vs.specialist(2011-2021)57Chart 28:Specialist
17、mandate breakdown by asset class(2011-2021)58Chart 29:Specialist mandate breakdown by asset class in 2021 59Chart 30:UK DB pension fund asset allocation(2000-2021)59Chart 31:DC asset allocation,20 years prior to retirement and at retirement in 2021 60Chart 32:Specialist mandate breakdown by asset cl
18、ass among UK pension funds in 2021 60Chart 33:Active and indexing third party mandates by client type in 2021(sample adjusted)61Chart 34:Segregated and pooled mandates among third party pension funds in 2021 61Chart 35:Total industry funds under management(2006-2021)64Chart 36:UK investor funds unde
19、r management through 2021 64Chart 37:Drivers of industry growth(1980-2021)65Chart 38:Funds under management by asset class(2006-2021)65Chart 39:Total net retail sales and net retail sales as a percentage of funds under management(2006-2021)66Chart 40:Monthly net retail sales by asset class(2020-2021
20、)67Chart 41:Quarterly money flow to deposits held by UK banks and building societies(Q1 2020-Q4 2021)67THE INVESTMENT ASSOCIATION6Chart 42:US interest rates and Consumer Price Index(July 1954 June 2022)68Chart 43:Quarterly net retail sales(Q1 2007 Q2 2022)69Chart 44:Monthly proportion of funds under
21、 management in responsible investments(Jan 2020 Dec 2021)70Chart 45:Responsible investment funds under management by asset class and component in 2021 71Chart 46:Responsible investment net retail sales by asset class(2020-2021)71Chart 47:Net retail sales to active and index tracking funds(2011-2021)
22、72Chart 48:Active funds and tracker funds as a proportion of total funds under management(2006-2021)72Chart 49:Net retail sales of tracker funds by index investment type(2011-2021)73Chart 50:Equity funds,net retail sales by region(2011-2021)73Chart 51:Performance of the major equity indices on a cap
23、ital return basis(January 2017 December 2021)74Chart 52:Monthly net retail sales by equity region(January 2020 December 2021)74Chart 53:Monthly net retail sales,UK equity sectors(January 2017 December 2021)76Chart 54:Fixed income,net retail sales by sector(2011-2021)76Chart 55:Monthly fixed income n
24、et retail sales(January 2020 December 2021)77Chart 56:Monthly net retail sales to the Sterling bond sectors(January 2020 December 2021)78Chart 57:Monthly net retail sales to the non-Sterling bond sectors in 2021 78Chart 58:Outcome and allocation,net retail sales by sector(2012-2021)79Chart 59:Monthl
25、y outcome and allocation,net retail sales by sector(Jan 2020-Dec 2021)79Chart 60:Property funds under management and net retail sales(2011-2021)80Chart 61:Net retail sales by type of property fund(2011-2021)80Chart 62:Fund of funds FUM and net retail sales(2011-2021)81Chart 63:Net retail sales by di
26、stribution channel(2013-2021)82Chart 64:Retail investor average holding periods(2006-2021)82Chart 65:Total subscriptions to cash and stocks&shares ISAs(2008/2009 2020/2021)83Chart 66:Total assets in stocks&shares ISAs by type of asset(2021-2021)83Chart 67:Industry concentration of UK-domiciled funds
27、 under management(2011-2021)84Chart 68:Fund gross sales concentration excl.money market funds(2012-2021)84Chart 69:UK domiciled funds by investor profile(2016-2021)85Chart 70:UK investor funds under management by fund domicile(Q1 2016 Q4 2021)85Chart 71:Proportion of UK investor FUM by fund domicile
28、(2015-2021)86Chart 72:Monthly UK investor net retail sales by fund type(January 2020 December 2021)86Chart 73:Annual percentage of net retail sales by fund type(2012-2021)87Chart 74:Europe-wide UCITS net sales(Q1 2019 Q4 2021)87Chart 75:Assets in UCITS and AIFs by domicile(2019-2021)88Chart 76:Indus
29、try net revenue and profitability(2019-2021)90Chart 77:Distribution of investment manager profitability in 2021 90Chart 78:Industry headcount estimate vs.UK assets under management(2007-2021)92Chart 79:Direct employment staff segment(2016-2021)94Chart 80:IA member firms ranked by UK assets under man
30、agement(June 2021)95Chart 81:Market share of largest firms by UK assets under management vs.HHI(June 2011 June 2021)97Chart 82:Top ten firms by UK-managed and global assets under management in December 2021 97Chart 83:Breakdown of UK AUM by region of parent group HQ(2011-2021)98Chart 84:Breakdown of
31、 UK AUM by parent type(2011-2021)98INVESTMENT MANAGEMENT SURVEY 2021-22|INDEX OF CHARTS,FIGURES AND TABLES7FIGURESFigure 1:Who are the IAs Members?15Figure 2:The role of investment managers in channelling savings to investments 16Figure 3:Total return of selected bond and equity markets in 2021 17Fi
32、gure 4:Wider investment management industry 19Figure 5:Assets under management in European countries(December 2020)20Figure 6:Assets managed for overseas clients 21Figure 7:The FCAs potential approach to a sustainable product classification and labelling system 30Figure 8:Three scenarios for Investm
33、ent Fund 3.0 35Figure 9:Four measures of a global industry in 2021 36Figure 10:IA member holdings in UK asset classes in 2021 45Figure 11:Infrastructure investment by IA members 46Figure 12:Selection of UK infrastructure investment facilitated by IA members(2021)46Figure 13:Overview of the UKs pensi
34、on landscape in 2021 53Figure 14:Map of directly and indirectly employed staff across the UK(2021)91TABLESTable 1:Global assets under management in 2021 20Table 2:Definitions based on the IAs Responsible Investment Framework 29Table 3:Proportion of IA members investing by asset class in 2021 43Table
35、 4:Distribution of staff by activity in 2021 93Table 5:Distribution of investment management jobs by region in 2021 94Table 6:Assets managed in the UK by IA members by firm size(2016-2021)958ABOUT THE SURVEYTHE INVESTMENT ASSOCIATIONTHE SURVEY CAPTURES INVESTMENT MANAGEMENT UNDERTAKEN BY MEMBERS OF
36、THE INVESTMENT ASSOCIATION(IA)ON BEHALF OF DOMESTIC AND OVERSEAS CLIENTS.UNLESS OTHERWISE SPECIFIED,ALL REFERENCES TO UK ASSETS UNDER MANAGEMENT REFER TO ASSETS,WHEREVER DOMICILED,WHERE THE DAY-TO-DAY MANAGEMENT IS UNDERTAKEN BY INDIVIDUALS BASED IN THE UK.THE ASSET VALUE IS STATED AS AT DECEMBER 20
37、21.THE FINDINGS ARE BASED ON:Questionnaire responses from 74 IA member firms,who between them manage 10.0 trillion in the UK(86%of total UK assets under management by the entire IA membership base).Other data provided to the IA by member firms.Data provided by third party organisations where specifi
38、ed.Publicly available information from external sources where relevant.Interviews with senior personnel from 9 IA member firms.THE IA WOULD LIKE TO EXPRESS ITS GRATITUDE TO MEMBER FIRMS WHO PROVIDED DETAILED QUESTIONNAIRE INFORMATION AND TO THOSE WHO TOOK PART IN THE INTERVIEWS.THE SURVEY IS IN SIX
39、CHAPTERS:1.UK Investment Management Industry:A Global Centre2.Key Themes in a More Uncertain World3.Trends in Client Assets and Allocation4.UK Institutional Client Market5.UK Retail Funds Market6.Operational and Structural Issues THERE ARE ALSO FIVE APPENDICES:1.Summary of assets under management in
40、 the UK2.Summary of data from the UK institutional market3.Notable M&A deals in the UK investment management sector(2009 July 2022)4.Definitions5.Survey and interview respondentsA NUMBER OF GENERAL POINTS SHOULD BE NOTED:Not all respondents were able to provide a response to all questions and theref
41、ore the response rate differs across questions.The Survey has been designed with comparability to previous years in mind.However,even where firms replied in both years,some may have responded to a question in one year but not in the other or vice versa.Where meaningful comparisons were possible,they
42、 have been made.Numbers in the charts and tables are presented in the clearest possible manner for the reader.At times this may mean that numbers do not add to 100%,or do not sum to the total presented,due to rounding.910.0TRNMANAGED BY IA MEMBERS IN THE UKWORLDS LEADING INTERNATIONAL INVESTMENT HUB
43、 89BILLION IN RESPONSIBLE INVESTMENT FUNDS 4.6TRILLION MANAGED FOR OVERSEAS INVESTORS 40 BILLIONINVESTED IN UK INFRASTRUCTURE122,000 JOBS ACROSS THE INDUSTRY 700BILLION MANAGED IN SCOTLAND INVESTMENT MANAGERS OWN 33%OF UK PLC 1.6TRILLION INVESTED IN THE UK ECONOMY INVESTMENT MANAGEMENT SURVEY 2021-2
44、2|ABOUT THE SURVEY10THE INVESTMENT ASSOCIATIONSURVEY FOREWORDOUR LATEST INVESTMENT MANAGEMENT SURVEY SHOWS THE UK INVESTMENT INDUSTRY MAINTAINING RESILIENCE AND GROWTH AS IT EMERGED FROM THE PANDEMIC.ASSETS UNDER MANAGEMENT(AUM)BY IA MEMBERS ON BEHALF OF UK AND INTERNATIONAL CLIENTS CLIMBED TO A REC
45、ORD 10 TRILLION BY 2021S YEAR-END.IT IS PARTICULARLY ENCOURAGING TO SEE THE UK INDUSTRY RETAIN ITS POSITION AS THE LEADING INTERNATIONAL CENTRE FOR INVESTMENT MANAGEMENT.IN 2021,WE CONTINUED TO INCREASE THE PROPORTION OF ASSETS MANAGED ON BEHALF OF CLIENTS FROM ACROSS THE WORLD,WHICH GREW TO NEARLY
46、HALF OF TOTAL AUM.THE INDUSTRY NOW EMPLOYS 122,000 PEOPLE IN TOWNS AND CITIES ACROSS THE UNITED KINGDOM AND OUR COMMITMENT TO FURTHERING DIVERSITY AND INCLUSION IS PUTTING IN PLACE THE FOUNDATIONS TO ATTRACT THE NEXT GENERATION OF INVESTMENT MANAGERS.In 2021,the growth of sustainable and responsible
47、(S&RI)investing was a standout trend in our data with ESG integration now applied to nearly half of AUM.In the retail market funds under management in S&RI strategies grew by 62%,far outpacing the 11%growth of UK investor FUM overall.Another interesting finding was the extent to which a new generati
48、on of lockdown savers started to invest through 2020-2021.Inflows to funds from UK retail investors in 2021 were 43.5 billion,the second highest on record.After very little movement for a decade,we have seen the proportion of assets managed on behalf of retail clients increase to 22%of total AUM.Whi
49、lst 2021 was a positive year,we now face a very different operating environment.In February 2022,Russia invaded Ukraine.This tragic event continues to have profound consequences for the Ukrainian people and our firms were caught in the eye of the storm as we raced to implement the sanctions on Russi
50、an companies and to carry out an orderly programme of divestment.The ramifications of the war for the global economy have been far reaching,setting in motion a chain of events that resulted in European energy supply shocks,cementing persistent and rising inflation.We are now at the end of the era of
51、 rock bottom interest rates and the monetary policy orthodoxy of the last ten years.Looking back to the 1970s does not provide a playbook for central bankers and politicians and even the most experienced chief investment officers must navigate new market dynamics.Investors are now experiencing a ser
52、ies of unfolding challenges.Portfolio managers face a test of their mettle not seen in a generation.Rising interest rates bring the spectre of recession and weaken the outlook for asset growth.It will become harder to maintain the 10%compound annual growth rate of AUM over the last 10 years.In this
53、environment,investors will seek access to returns that are uncorrelated.This lends urgency to opening up access to alternative assets and private markets.Innovative new fund structures such as the Long-term Asset Fund(LTAF)will increase investor choice and the LTAF could prove to be the catalyst for
54、 democratising access to private assets for ordinary pension savers,enabling access to the illiquidity premium enjoyed by institutional investors.11INVESTMENT MANAGEMENT SURVEY 2021-22|SURVEY FOREWORDIndeed,the UK is acknowledged by industry leaders as a global centre of sustainable and responsible
55、investment expertise and this stands us in good stead as we seek to manage a growing share of sustainable investment strategies.Our focus has also turned to the developing regulatory regime in the UK including the forthcoming Sustainability Disclosure Regulation and reporting initiatives such as TCF
56、D.As S&RI regulation is rolled out at pace,we must call the attention of regulators to interoperability between the US,UK and the EU in this increasingly complex area.This is critical in promoting consistent global standards and meeting net zero commitments across jurisdictions.I hope that you find
57、the Survey interesting and informative and I welcome any thoughts on aspects of the industry that you would like us to explore in future editions.Chris Cummings CEO Investors face strengthening headwinds into 2023 and their ability to put money aside each month will be constrained as the cost-of-liv
58、ing crisis bites.We have yet to see the full impact of the crisis on pension opt out rates but early surveys indicate that they are rising.In the retail funds market,outflows for the first half of 2022 are 12 billion,which indicates the scale of the challenge investors are facing.As we look ahead to
59、 next years priorities,alongside delivering on our competitiveness and innovation agenda,we mustnt lose focus on the investor as we strengthen our commitment to supporting their financial inclusion and resilience.As we gather ourselves to continue to weather the economic storm,our new government is
60、racing to cement its growth and productivity agenda.For its part,the industry is considering how it can strengthen its support for that agenda,drawing on existing initiatives such as the LTAF while re-examining how stewardship and the capital markets more broadly can adapt to support UK competitiven
61、ess.Clearly,the future regulatory framework will help to determine how the UK system operates and the Government,alongside our Regulator,must continue to re-evaluate this framework looking not only through the lens of investor protection but also of competition and innovation.By delivering the Finan
62、cial Services and Markets Bill and looking again at other tax and regulatory costs,the Government can help to support the UKs future as a competitive centre for portfolio management and one with ambitions to grow its share of fund administration.In many ways,the disruption in geo-politics and the sh
63、ift in the market cycle serves to re-enforce the areas of strategic importance that we have identified as an industry.Our commitment to investing responsibly and sustainably and to maintaining the UKs attractiveness as a global investment management centre remain.But it does require some careful re-
64、calibration:in the sphere of sustainable investing,our attitudes to defence have evolved following the Russia/Ukraine war and our notions of a socially responsible company are becoming more important.More broadly,some of the old links of globalisation are breaking,causing new diplomatic and trading
65、relationships to be forged.Amidst this,we shouldnt lose sight of our strength as a global centre and we must continue to make it easier for the best and the brightest in global investment talent to come to work here.IA MEMBERS MANAGED A RECORD 10.0TRN FOR UK AND OVESEAS CLIENTS AT THE END OF 2021EXE
66、CUTIVE SUMMARY12THE INVESTMENT ASSOCIATIONUK INVESTMENT MANAGEMENT INDUSTRY:A GLOBAL CENTRE Total assets under management(AUM)managed by IA members reached 10.0 trillion at the end of 2021,which represents a 6%increase on the previous year.Growth in AUM over the last decade has largely been supporte
67、d by strong capital market performance.However,as we enter a period of greater uncertainty and increased volatility,we will likely see an impact on AUM growth.The UK maintains its position as one of the largest and most international investment management centres in the world.Total assets managed on
68、 behalf of overseas clients,reached 46%in 2021,a nine percentage point increase since 2016.The UK investment management industry also continues to be a centre of excellence when it comes to portfolio management.Of the 4.1 trillion in UK managed investment fund assets,almost two thirds(65%)sit in fun
69、ds domiciled overseas where the portfolio management is delegated to a UK based portfolio manager.This marks a nine percentage point increase since 2016.KEY THEMES FOR THE UK INDUSTRY This years survey identifies six defining themes for the UK investment management industry:1.The economic outlook is
70、 looking increasingly uncertain posing a significant challenge to investment managers ability to generate portfolio returns and bring in new capital.2.Sustainable and responsible investment continues to be a dominant theme for the industry.In 2021,assets subject to ESG integration stood at 47%while
71、assets applying exclusions reached 28%.The proportion of assets subject to sustainability focused criteria saw the most substantial growth,rising from 2.6%of assets to 8%.Impact investments remain a niche area and represent just 0.5%of assets.3.Global assets in private markets are growing,reaching$1
72、0 trillion,however private markets remain a small proportion of the IA member asset base at 3%of AUM.We expect interest to intensify as investors look to diversify their returns in a challenging market.New fund vehicles such as the Long Term Asset Fund,will broaden access to investment in the privat
73、e markets to a wider group of clients.4.Digitalisation of the investment process,from operations,to product design and consumer interaction,will accelerate and will be a key driver of industry transformation.Much of the current focus is on the tokenisation of funds,but firms are also exploring the w
74、ays in which technology can help in the delivery of more customised products.5.Maintaining UK competitiveness in the post-Brexit landscape is critical.IA members have identified sustainable finance,technological advancement and innovation as key exportable opportunities for the UK investment managem
75、ent industry.However,the industry remains cautious about the threats to competitiveness particularly in regards to regulation and the cost of doing business in the UK.6.Diversity,equity and inclusion continues to be a priority for the investment management industry.Much work has been done on recruit
76、ing a diverse workforce and there is now an increasing focus on the impact of equity and inclusion on retention and advancement.TRENDS IN CLIENT ASSETS AND ALLOCATION Trends in client type remained broadly unchanged for most of the past decade.However,over the past three years the proportion of asse
77、ts managed on behalf of institutional clients has fallen from 80%to 77%.Meanwhile,the share of assets managed on behalf of retail clients grew from 19%to 22%.The proportion of assets invested in equities has increased each year between 2018 and 2021 from 36%to 42%.We have also seen the share of fixe
78、d income assets dip to 30%in 2021,which is the lowest proportion in two decades of data collection.A key theme in asset allocation has been the global diversification of investments.In 2021 over half(55%)of fixed income assets were held in overseas bonds,compared with one third(34%)of holdings ten y
79、ears ago.At the same time,UK equity holdings continue to decline as a proportion of total equities,falling to 23%.North American equities have INVESTMENT MANAGEMENT SURVEY 2021-22|EXECUTIVE SUMMARY13surpassed UK equities as the largest market for equity investments in 2021 and now account for 30%of
80、total equity holdings.Indexing strategies account for 32%of the 10.0 trillion of total AUM,a one percentage point increase since 2020 and a ten percentage point increase over the decade.ETFs have been an important contributor to the growth of indexing strategies in recent years.UK INSTITUTIONAL CLIE
81、NT MARKET IA members manage 4.7 trillion globally on behalf of UK based institutional clients,this is up from 4.5 trillion the previous year.UK pension funds and insurers were responsible for 85%of the assets.Third-party assets under management stood at 4.1 trillion,once in-house mandates were exclu
82、ded from the institutional data.This is up from 3.9 trillion in 2020.Pension funds remain the largest client type,accounting for 70%of third-party assets.Total assets in liability driven investment(LDI)strategies continued to rise reaching almost 1.6 trillion,almost four times the 400 billion report
83、ed in 2011.LDI is largely used by DB pension schemes.When we exclude LDI assets,we observe that specialist mandates continue to be the mandate of choice in the third-party institutional market,accounting for 81%of total assets.Within specialist third party mandates,2021 saw a two percentage point in
84、crease in the proportion of assets in equity mandates to 38%while the proportion of assets in fixed income mandates dipped four percentage points over the year to 35%,the lowest level since 2013.UK RETAIL FUNDS MARKET UK investor funds under management(FUM)reached a record 1.59 trillion at the end o
85、f 2021,an 11%increase over the year.Annual net retail sales in 2021 were 43.5 billion,the second highest on record.Sustainable and responsible investment(S&RI)FUM grew 62%to 89 billion in 2021,increasing the share of S&RI funds from 3.8%to 5.6%of industry FUM.Sales to responsible investment funds re
86、mained strong throughout the year despite an increasingly challenging performance environment,totalling 16 billion.2021 saw a continued resurgence in sales to actively managed funds which outsold index trackers for the first time since 2017.Net retail sales to actively managed funds were 25.3 billio
87、n,although sales to trackers remained consistently strong at 18 billion.While performance in 2021 was strong,growth in FUM and sales over the last decade or so has been supported by an era of low interest rates.This ended in 2022 as central banks raised rates as part of their efforts to combat risin
88、g inflation.In the first half of 2022,we have seen 12 billion in retail outflows.In this high interest rate and inflationary environment,the challenges for the retail funds market include an increasingly difficult environment for investment returns,lower savings capacity for investors grappling with
89、 the rising cost of living and the competing appeal of cash saving as interest rates rise.OPERATIONAL AND STRUCTURAL ISSUES Total industry revenue after commission stood at 25.8 billion in 2021 while costs stood at 18.3 billion.Operating profit was 29%,a one percentage point increase on the previous
90、 year however,individual firm level profitability continued to vary widely.The UK investment management industry supports approximately 122,000 jobs either directly or indirectly.Almost 45,000 people were directly employed at the end of 2021,an increase of 7%on the previous year.This is higher than
91、the growth we have seen in recent years.We estimate that a further 77,000 people are indirectly employed in supporting industries.The UK investment management industry remains relatively unconcentrated.Total assets managed by the top five and the top ten firms stood at 44%and 60%respectively.This is
92、 broadly unchanged since 2020.SIZE OF THE UK INDUSTRY Assets under management(AUM)by IA members reached almost 10.0 trillion in 2021,a 6%increase on the 9.4 trillion reported the previous year.This is below the 11%compound average annual growth rate observed over the last ten years.Scotland remains
93、an important centre for the UK investment management industry,with assets under management in Scotland surpassing 700 billion in 2021 and continuing to account for 7%of total UK AUM.Total assets under management within the wider industry reached 11.6 trillion this past year.This is a 5%increase on t
94、he previous year,UK INVESTMENT MANAGEMENT INDUSTRY IN A GLOBAL CONTEXT Global AUM reached 83 trillion in 2021.The UK continues to be a centre for excellence in investment management the largest industry in Europe and second only to the United States worldwide.The UK investment management industry is
95、 one of the worlds leading international centres,46%of UK AUM is managed on behalf of overseas clients,up from 37%since 2016.The majority of overseas clients are European(at 59%),with North American clients being the second largest overseas client group accounting for one fifth(19%)of overseas asset
96、s.There has been very little change in the regional composition of the overseas client base over the years.Assets in overseas-domiciled funds have seen accelerated growth over the past couple of years.As of the end of year 2021,65%of the 4.1 trillion in investment funds sit in overseas-domiciled fun
97、ds;up from 63%in 2020,and 9 percentage points higher than in 2016.KEY FINDINGS14THE INVESTMENT ASSOCIATION1 UK INVESTMENT MANAGEMENT INDUSTRY:A GLOBAL CENTRE IN 2021,THE VALUE OF ASSETS UNDER MANAGEMENT MANAGED BY IA MEMBERS REACHED 10.0TRN115INVESTMENT MANAGEMENT SURVEY 2021-22|UK INVESTMENT MANAGE
98、MENT INDUSTRY:A GLOBAL CENTRE that capital markets work effectively so that investment can take place.Allocating capital on behalf of investors contributes to efficient markets which price information correctly and allow buyers and sellers to transact.This facilitates both primary issuance,when comp
99、anies or governments are trying to raise money,and secondary trading of different instruments.Without efficient markets,market economies cannot grow effectively or may even destabilise.Investment managers are not unique in this role.Other financial institutions and individuals contribute to capital
100、market efficiency,but the industry has historically been at the heart of long-term capital allocation,whether through shares,bonds or other assets.As long-term holders of investments,UK investment managers hold UK equities over many years.1 The industry therefore has an important responsibility to u
101、ndertake stewardship of the companies they invest in to promote good governance and to protect the companys value for their clients.As we discuss in other parts of the Survey,the role of the industry increasingly extends to broader issues such as combating climate change and executive remuneration p
102、olicies.This wider role is expected to become even more important in future years as part of the focus on responsible and sustainable investment.1 A study undertaken for the IA found that investment managers hold UK equities for an average of six years.See The contribution of asset management to the
103、 UK economy,July 2016,Oxera.This chapter provides an overview of the UK investment management industry highlighting areas of growth,placing it in a European and global context and emphasising the ways in which the UK investment management industry continues to thrive as a globally recognised centre
104、for excellence in portfolio and asset management.ROLE OF INVESTMENT MANAGEMENT The investment management industry has a central role in the economy,channelling savings into long term investments in order to deliver returns for a wide range of clients,whether these are individual savers or institutio
105、ns such as pension schemes.These two aspects are illustrated in Figure 1.Services to clients involve wide expertise in areas such as risk management and giving access to a wide range of assets that would normally be out of reach for individual investors.The ultimate goal is to provide customers with
106、 a basket of shares,bonds and other assets such as property,which can deliver returns over many years without exposing the investor to undue risk.The industrys role goes beyond investing in different asset classes.Investment managers help to ensure FIGURE 1:WHO ARE THE IAS MEMBERS?Specialist pension
107、 scheme managersboth Occupational(OPS)scheme managers running in-house investment management services for a large scheme,and Local Government Pension Scheme(LGPS)pools,supporting the LGPS investment process.Full members of the IA can be broken down into five broad groups:12345Large investment manage
108、ment firms(both UK and overseas-headquartered),which may be independent or part of wider financial services groups such as banks or insurance companies.They undertake a wide range of investment management activities across both retail and institutional markets and manage substantial amounts for over
109、seas client in the UK.Such firms will typically be managing 100 billion from the UK,but a number of international firms have a smaller UK footprint.Small and medium-sized investment management firms primarily focused on UK and/or European clients,which undertake a diverse range of activities,of whic
110、h investment management is a constituent part.Fund managerswhose business is based primarily on authorised investment funds.Specialist boutiques and private client managerswith a smaller asset and client base and,typically,a specific investment or client focus.THE INVESTMENT ASSOCIATION16SIZE OF UK
111、INDUSTRY Between December 2020 and December 2021,IA member UK managed assets under management(AUM)reached 10.0 trillion,a 6%increase from the 9.4 trillion reported last year.This growth is well below the 11%compound average growth rate for the past ten years.UK authorised and recognised funds under
112、management(FUM)rose to 1.6 trillion by the end of 2021,up from 1.4 trillion in 2020 which represents a growth rate of 11%on the previous year,outpacing the growth of AUM for the third year in a row.This growth is in line with the compound average growth rate observed over the past ten years.Chart 1
113、looks at the evolution of industry AUM and FUM over the last fifteen years.Assets increased threefold over that period,buoyed by the longest bull run in history which began in 2009 and lasted until the Covid-19 pandemic hit in 2020.2020 saw markets crash in March and recover quickly to reach record
114、highs,FIGURE 2:THE ROLE OF INVESTMENT MANAGERS IN CHANNELLING SAVINGS TO INVESTMENTSINVESTMENTMANAGERSCOMPANIES/GOVERNMENTS/INFRASTRUCTURERETAIL AND INSTITUTIONAL CUSTOMERSINVESTMENTIN ECONOMYSAVINGSPROVIDE NEW CAPITAL MARKET FINANCINGACCESS TO EXPERTISE,SCALE AND ASSETS OUTSIDE REACH OF INDIVIDUALS
115、HOLD UK EQUITIES FOR AROUND 6 YEARSLINK INVESTORS AND COMPANIES In this section we offer a high-level analysis of global capital market performance in 2021 and,in Figure 3,highlight the annual total return2 of selected indices.Market performance was split in 2021 equity markets performed extremely w
116、ell,in large part thanks to the flurry of economic activity in a world emerging from lockdown,but bond markets suffered from fears around rising inflation.The successful Covid-19 vaccine trials of November 2020 acted as a driving force for the impressive performance of equity markets in 2021.The sen
117、se of optimism that the worst of the pandemic was over prompted a surge in consumer spending and supported a positive outlook for the post-pandemic economic recovery.Equity markets experienced strong returns throughout the year despite a range of challenges including severe supply chain disruptions,
118、high energy prices and rising inflation.Total returns for global equity markets ended the year up 20%,compared with 13%in 2020,which was already a strong year for capital market performance.US equities were a major contributor to Global market performance3,generating total returns of 27%over the yea
119、r.This is largely attributed to a strong tilt towards high growth sectors such as technology,which performed extremely well throughout 2021.UK equity markets fared much better in 2021 than they did in previous years.UK equity performance was impeded by suspensions/cancellations of dividends in 2020,
120、which are a big component of the FTSEs total returns4.As the UK emerged from lockdown and the economy reopened in 2021,dividend payments resumed and market performance picked up,contributing to a total return of 18%over the year,on par with Europe.Despite the strong performance,UK equities still und
121、erperformed US equities.This broadly reflects the composition of the UK equity market which has a higher weight to defensive stocks which perform better relative to other industries when inflation,and consequently interest rates,are rising.This has helped UK equities perform better than other market
122、s,including the US,in 2022.BOX 1:GLOBAL CAPITAL MARKET PERFORMANCE IN 2021 117INVESTMENT MANAGEMENT SURVEY 2021-22|UK INVESTMENT MANAGEMENT INDUSTRY:A GLOBAL CENTRE Asian equity markets rose alongside US,European and UK equity markets until autumn 2021,when political and financial turbulence in Chin
123、a eroded international investor confidence with repercussions for the entire region.The Chinese governments regulatory crackdown on the tech sector,the declaration of bankruptcy of the Chinese property giant Evergrande and the slowing growth in the housing market,and a return into strict lockdown(as
124、 part of Chinas Zero-Covid policy)negatively impacted the economy and damaged market performance.The Asian equity market ended the year with positive returns at 2%,compared with 18%in 2020.BOND MARKETSIn 2021,all major bond indices experienced significant losses not seen since the 1980s and ended th
125、e year in the red.This underperformance is largely attributed to rising inflation,which presents a significant challenge for the bond market as it erodes the value of future fixed interest payments.From the very beginning of 2021,a rise in yields hit UK Corporate Bonds and UK Government Bonds total
126、returns.Returns started to recover as the economy re-opened,but in Q3 escalating gas and oil prices exacerbated the impact of rising inflation on bond markets in the UK and other developed markets around the world5.Although inflation had been increasing through the year,by Q3 markets began to make a
127、djustments on the basis that inflation was no longer transitory,and the Bank of England(BoE)signalled interest rates would likely be raised to temper the impact of inflation on the economy.Though the BoE did not raise interest rates until the 15th of December,through Q4 bond markets adjusted to refl
128、ect persistent inflation.This prompted a drop in total returns of UK Gilts and Non-Gilts,which ended the year at-5%and-3%,respectively.This was echoed in the US(-1%total returns)and in the Global bond market(-4%).By comparison,in 2020 UK Gilts and Non-Gilts outperformed Global bonds,which ended the
129、year with returns of 9%,8%and 6%.The challenges facing bond markets have so far intensified in 2022.As the invasion of Ukraine solidified the rise of inflation,sterling denominated bond prices have tumbled and fixed income funds have sustained heavy outflows.After yields spiked in the first quarter
130、of the year,US bond prices recovered in Q2.(See page 70 in chapter 5 for more information on the impact of inflation on fund flows in retail markets.)FIGURE 3:TOTAL RETURN OF SELECTED BOND AND EQUITY MARKETS IN 2021 Global equityUK equityUS equityEurope(ex-UK)equityEmerging markets equityJapan equit
131、y Asia Pacifc(ex-Japan equity)Global bondsUK GiltsUK Non-Gilts-8%0%8%15%23%30%Source:Morningstar2 Total return is more representative of the return an investor would receive than capital returns.Total returns include income distributions through dividends or share buyback as well as the rise and fal
132、l of stock or bond prices that are measured through capital returns.3 At the time of writing,the MSCI World Index has a 69%weighting/exposure to the US.4 In 2020,headline dividends fell by 44%to 61.9 billion(the lowest annual total since 2011)and two thirds of companies cancelled or cut their divide
133、nd payments(Link Group,UK Dividend Monitor Q4 2020).5 The UK Consumer Price Index rose from 0.6%in December 2020 to 2.5%in June 2021 and finally reached 5.4%at the end of the year.This is the steepest rise in inflation developed economies have had to reckon with for years(ONS data,Consumer price inf
134、lation,UK:December 2021).THE INVESTMENT ASSOCIATION18SCOTLAND AS A MAJOR CENTREThere are two primary city hubs in the UK for investment management;London is by far the largest both in terms of headcount and level of assets managed within the city,with Edinburgh coming in as the second largest hub.In
135、 2021,assets managed from Scotland reached 700 billion,a small increase on the previous year.This is equivalent to 7%of total AUM.The longer-term trend observed over the past decade has been an overall decrease in the proportion of assets managed in Scotland.In 2011,the proportion of Scotland-manage
136、d assets was 12%of UK AUM,almost double the level observed in 2021.This is a reflection of merger and acquisition activity among Scottish firms which has caused growth to stall,as well as the faster relative growth in London and elsewhere in the UK,rather than a fall in Scottish managed assets in ab
137、solute terms.Chart 2 shows the location of regional headquarters for UK-based investment management firms.Over ten years,we see a ten-percentage point increase in the proportion of firms headquartered in London.The share of Scotland headquartered firms has fallen from 28%in 2011 to 19%in 2021 and th
138、e share of other regional locations has remained relatively unchanged,fluctuating between 2 and 3%.Much of the portfolio management capability of Scottish headquartered firms is based in London,which is why we see a difference between the 7%of assets managed in Scotland versus the 19%of assets manag
139、ed by Scottish headquartered firms.For more detail on the regional location by function see Chapter 6 of this report.In this period of uncertainty,it is unlikely that the sustained growth observed in Chart 1 will continue at the same rate and may reverse,at least for some time.The right-hand side of
140、 Chart 1 also looks at the size of the UK investment management industry relative to GDP.We see that the AUM as a proportion of gross domestic product(GDP)has fallen for the first time in the past four years,which suggests that growth in AUM was outpaced by the year on year growth rate of the UK GDP
141、.However,assets managed within the industry are still over four times bigger than the size of the UK economy.further pushing up FUM and AUM.In 2021,capital market performance was quite varied depending on the asset class and region you were invested in(see Box 1).Whilst most equity markets grew,bond
142、s saw negative returns for the year.This is likely to have contributed to a slowdown in growth at the AUM level.There were pandemic related jitters throughout 2021,with the first quarter spent in lockdown,followed by the impact of the spread of the Delta and then Omicron variants but overall,equity
143、markets performed strongly while fixed income market performance was more challenging.As the economy reopened,surging demand resulted in supply chain disruptions and inflation continued to rise,particularly in the last quarter of the year.The story in 2022 is different,the global economy is entering
144、 a period of great uncertainty and rising volatility.Many economists have commented that The Great Moderation the period of stable growth and inflation since the mid-1980s has come to an end.The war in Ukraine has further exacerbated some of the supply chain shocks that emerged post pandemic,with fo
145、od and energy prices in particular soaring.UK inflation reached a 40 year high of 9.4%by mid-year despite a number of interest rate rises by the Bank of England.Central banks have so far been hawkish and we have seen a number of rates rises which will have a direct impact on growth.CHART 1:TOTAL ASS
146、ETS UNDER MANAGEMENT IN THE UK AND IN UK FUNDS(2007-2021)121086420200720082009201020112012201320142015201620172018201920202021UK authorised and recognised funds Total assets under management in the UKTotal UK AUM/GDP%(RH)trn 600%500%400%300%200%100%0%GDP Source:IA data,Office of National Statistics(
147、ONS)119INVESTMENT MANAGEMENT SURVEY 2021-22|UK INVESTMENT MANAGEMENT INDUSTRY:A GLOBAL CENTRE FIGURE 4:WIDER INVESTMENT MANAGEMENT INDUSTRYIAMEMBERSHIP10.0TRNPRIVATECLIENT780BNUK COMMERCIAL PROPERTY MANAGERS 500BNHEDGE FUNDS 350BNPRIVATEEQUITY370BNTOTAL ASSETSMANAGED IN THEUK ESTIMATED AT11.6TRNETF
148、OPERATORS 675BNSource:ComPeer,Investment Property Forum,Morningstar,Preqin and IA estimates.CHART 2:UK-MANAGED ASSETS BY UK REGIONAL HEADQUARTERS(2011-2021)100%90%80%70%60%50%40%30%20%10%0%2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021London Scotland Other SCALE OF WIDER INDUSTRYThe Investme
149、nt Associations members are responsible for the majority(83%)of assets managed in the UK as part of the investment management industry.While the IA membership remains diverse,most of the firms not covered in this report can be categorised as follows:Hedge funds Private equity funds Commercial proper
150、ty management Discretionary private client management A small number of dedicated ETF operatorsThere are also some firms who are not members of the IA other than those listed above,but it is difficult to accurately size this group as there is no consistent third-party data available.Figure 4 estimat
151、es the contribution of these firms to total assets under management in the UK as 11.6 trillion.Many of our member firms are active participants in the industry niches listed above so there will be some degree of overlap between this number and the total AUM managed by IA member firms in Figure 1,par
152、ticularly the ETF asset numbers.We have estimated that total assets managed in the wider industry have grown 5%from a revised 11.1 trillion in December 2020 to 11.6 trillion in December 2021.THE INVESTMENT ASSOCIATION20UK INVESTMENT MANAGEMENT IN EUROPEAN AND GLOBAL CONTEXTAs of December 2021,global
153、 assets stood at 83 trillion.Together,the US,the UK and Europe are responsible for almost four fifths(77%)of global AUM with the US alone responsible for more than two thirds.As the UK grapples with the growing challenge of competitiveness in a post-Brexit environment,it continues to be seen as a ce
154、ntre of excellence for portfolio management more globally.The industry has maintained its standing as the second largest investment management centre(Table 1)behind the US which is nearly four times larger at 37 trillion in AUM.To put the size of the US market in context,total European AUM stood at
155、27 trillion in 2021.Japan is also a notably large asset management centre,with approximately 5 trillion of assets under management recorded for 2021.As discussed earlier in this chapter,the total value of UK-managed assets under management grew by 6%between 2020 and 2021.The US market grew at a much
156、 faster rate than the UK,as well as all other major investment management centres with a 12%growth rate.Meanwhile,the European market grew by 8%and growth in Japan has stalled.TABLE 1:GLOBAL ASSETS UNDER MANAGEMENT IN 2021 Assets under Assets under management management(local currency)(equivalent)Un
157、ited States$50 trillion 37 trillionEurope 32 trillion 27 trillionJapan 825 trillion 5 trillion Within Europe,the UK investment management industry is the largest and has a market share of 37%,a figure that has remained relatively stable over the past few years.This is illustrated in the rankings lis
158、ted in Figure 3,where we see that the UKs market share is larger than the next three combined with France at 16%,Germany at 10%and Switzerland at 9%.6 The Netherlands,which has one of the largest funded 6 This is based on December 2020 data published by EFAMA.FIGURE 5:ASSETS UNDER MANAGEMENT IN EURO
159、PEAN COUNTRIES(DECEMBER 2020)12345679108Country AUM(bn)Market share1.UK 10,442 37%2.France 4,582 16%3.Germany 2,882 10%4.Switzerland 2,488 9%5.Netherlands 1,826 6%6.Italy 1,553 6%7.Denmark 492 2%8.Spain 405 1%9.Belgium 346 1%10.Austria 151 1%Other 3,258 12%TOTAL 28,423 Source:EFAMApensions markets i
160、n Europe moved into the top five largest European asset management centres in 2020,with AUM rising a substantial 29%over the year.211INVESTMENT MANAGEMENT SURVEY 2021-22|UK INVESTMENT MANAGEMENT INDUSTRY:A GLOBAL CENTRE OVERSEAS CLIENT MARKETDespite some of the concerns highlighted in Chapter 2 rega
161、rding the UKs competitiveness as a financial centre following Brexit,the UK retains its position as a leading global investment management centre of excellence.The 10.0 trillion figure for total assets under management includes an estimated 4.6 trillion(46%)managed on behalf of overseas clients.Char
162、t 3 shows that in the last five years,overseas clients have commanded an increasing share of the asset base,rising nine percentage points from 37%in 2016 to 46%in 2021.CHART 3:CHANGE IN PROPORTION OF UK AND OVERSEAS CLIENTS(2016-2021)UK clients Overseas clients100%90%80%70%60%50%40%30%20%10%0%2016 2
163、017 2018 2019 2020 2021The locations of the UK industrys overseas client base are illustrated in Figure 6.European clients continue to make up the majority at 59%(a one-point increase on the previous year),with UK-based investment managers overseeing 2.7 trillion on their behalf.Most of these assets
164、 are managed for clients from the European Economic Area(around 2.4 trillion).Of the remaining assets,the majority(approximately 200 billion)is managed on behalf of Swiss clients.This year the IA has collected more information on the European clients our members serve.Of the 2.7 trillion managed on
165、behalf of European clients,two fifths(40%)of the assets are managed within segregated mandates,or 1.1 trillion in nominal terms.Of this 1.1 trillion in segregated mandate business,approximately 380 billion is managed on behalf of clients located in the Netherlands and 110 billion on behalf of German
166、 clients.Between 2020 and 2021,the value of assets managed in the UK on behalf of North American clients grew to 880 billion,a relatively small 20 billion increase on the previous year.However,the US is consistently the second largest client base for the UK industry.By comparison,Asian client assets
167、 increased by close to 100 billion to reach 700 billion.This year,we were able to collect more detailed data from our member firms on their Asian clients and can report the following breakdown:of Asian client assets managed in the UK,36%is managed on behalf of Japanese clients(upward of 250 billion)
168、and 7%for Chinese clients(close to 50 billion).Assets managed on behalf of Middle Eastern clients has seen little growth in previous years in nominal terms,which has resulted in the decline of its share of the UK industrys overseas client base.As of December 2021,however,there was an increase of nea
169、rly 40 billion in assets managed on behalf of clients in the Middle East which contributed to a rise in their market share from 5%in 2020 to 6%in 2021.FIGURE 6:ASSETS MANAGED FOR OVERSEAS CLIENTSNorthAmerica880bnLatin America40bnEurope2.7trnMiddle East260bnAsia700bnAfrica20bn22THE INVESTMENT ASSOCIA
170、TIONCHART 4:CHANGE IN PROPORTION OF ASSETS MANAGED FOR UK AND OVERSEAS FUNDS(2016-2021)Overseas domiciled funds UK domiciled funds 100%90%80%70%60%50%40%30%20%10%0%2016 2017 2018 2019 2020 2021SERVICES TO OVERSEAS FUNDSAnother global dimension of the UK investment management industry is the level of
171、 assets that sit within investment funds domiciled overseas,that are being managed from IA members UK-based teams.The delegation of these assets from overseas funds to UK based portfolio managers allows UK investment management expertise to be accessed from around the world.Each year,we capture data
172、 on assets that sit in open ended funds,investment trusts,ETFs,hedge funds and money market funds(MMFs).At the end of 2021,total assets in UK-managed investment funds stood at 4.1 trillion.Almost two thirds(65%)of these assets sit within overseas-domiciled funds,and of that,84%are in funds domiciled
173、 in the EEA,primarily Ireland and Luxembourg.Chart 4 illustrates the increase in the proportion of overseas-domiciled funds over the past few years.In 2016,assets in overseas-domiciled funds stood at 56%of total UK-managed investment fund assets;this increased to 59%in 2017 and then stagnated.The st
174、ep change recorded in 2016 is attributed to the fact that many IA members transferred European client assets from UK to overseas domiciled funds as part of their Brexit preparations.In 2020 and 2021,however,we saw a shift in the level of assets in overseas domiciled funds.Assets rose from 59%to 63%i
175、n 2020 and reached 65%in 2021.One possible reason for this could be the inclusion of ETFs in this data which have seen significant growth in assets in the last few years and are almost entirely domiciled overseas.AT THE END OF 2021,TOTAL ASSETS IN UK-MANAGED INVESTMENT FUNDS STOOD AT 4.1TRN23INVESTM
176、ENT MANAGEMENT SURVEY 2021-22|UK INVESTMENT MANAGEMENT INDUSTRY:A GLOBAL CENTRE 7 This is based on the latest data from the ONS,which has a two-year lag on figures.IMPORTANCE TO UK SERVICE EXPORTSThe growth in assets within overseas domiciled funds where portfolio management is delegated to the UK a
177、nd the increasingly international client base demonstrates an opportunity for UK investment management to export its services globally.Chart 5 looks at the investment management industrys contribution to the UKs total export earnings over the last two decades.Once adjusted for inflation,this contrib
178、ution has increased from 1.2 billion in 1999 to 6.1 billion in 2020.7 This is slightly down from the 6.3 billion in 2019.The right-hand side of Chart 5 indicates that fund manager contribution as a proportion of total net exports stood at 3.6%.The proportion of fund manager exports increased from th
179、e 1990s all the way up to the global financial crisis,when it peaked at 8.5%in 2010.Since then,fund management services as a share of total exports has decreased.Chart 5 captures earnings by independent asset managers and is likely to understate earnings from asset managers that are part of a wider
180、financial services group such as an investment bank or insurer.As such,the actual contribution of asset management overall to service exports is likely to be higher.CHART 5:EXPORT EARNINGS AND RELATIONSHIP TO UK SERVICE EXPORTS 8765432109%8%7%6%5%4%3%2%1%0%Export receipts(infation adjusted)Net fund
181、manager exports as%total net services exports(RH)1996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020bn Source:ONS1241.NAVIGATING A DIFFICULT ECONOMIC ENVIRONMENT The investment management industry and our clients are facing a number of economic headwi
182、nds including rising interest rates,the possibility of permanently higher inflation,potential for significant de-globalisation and and an overall more challenging environment for market returns and economic growth.Rising geopolitical tensions that may contribute to a de-globalisation of trade are of
183、 particular concern to the increasingly international UK investment management industry.2.INVESTING RESPONSIBLY AND SUSTAINABLY Buoyed by a run of good performance,investor demand for sustainable strategies continued to rise in 2021.IA members have cited improved data quality and reclassification of
184、 assets as the primary driver of this growth.Of the 10.0 trillion of assets under management(AUM):just under half(47%)were integrating ESG in the investment process,28%applied exclusions to their portfolios,and 8%were managed within sustainable-focused strategies.Impact investments remain niche with
185、 just 0.5%of AUM sitting within these strategies.Views were mixed on the impact that rising geopolitical tensions and near term economic uncertainty will have on the climate agenda as governments navigate very challenging conditions.Many see rising tensions,including the war in Ukraine,as further ev
186、idence for the need for the energy transition and see a push towards commitments to net zero.Regulation is focused on raising standards around disclosure as well as developing taxonomies to bring about consistency and clarity around definition of sustainable economic activities.3.ONGOING FOCUS ON PR
187、IVATE MARKETS Total assets in private markets reached$10 trillion in 2021.In 2021,less than 3%of the almost 10 trillion AUM was invested in private markets.However,we anticipate investments in private markets to increase as the market environment for returns becomes more challenging and regulation c
188、hanges to allow wider access to private markets.Access to private markets has historically been easier for certain parts of the institutional market.A new fund structure in the UK,the Long-Term Asset Fund(LTAF),aims to give DC pension and retail investors broader access to illiquid assets.The first
189、LTAFs are expected to be launched through 2022-2023.4.ACCELERATING PACE OF OPERATIONAL MODERNISATION The pandemic triggered an accelerated move towards digitalisation across the investment management industry in the UK-from operations through to product design and customer interaction.The industry i
190、s eager to work with regulators on an ambitious technological agenda to facilitate the evolution of the funds industry.Many IA members are developing Distributed Ledger Technology and exploring the tokenisation of assets.5.OPPORTUNITIES FOR GROWTH IA members have identified a number of opportunities
191、 for the UK to retain its standing as a leading international centre for investment management.A continued focus on innovation,both in terms of technological advancement and new product offerings such as the LTAF,will be critical.Sustainable finance also presents a huge exportable opportunity in ter
192、ms of products,human capital and regulatory developments.While optimistic about opportunities for growth,the industry remains cautious to potential threats to its international competitiveness which include the rising cost of doing business in the UK and growing regulatory burden.6.ENHANCING DIVERSI
193、TY&INCLUSION ACROSS THE SECTOR In 2021,the industry has broadened its focus on the diversity agenda to recognise that equity and inclusion play a key role in recruitment and advancement of diverse talent.While the industry has made progress on recruitment,more needs to be done around retention and m
194、any IA members are working on creating a culture of belonging.A key focus for the industry over the next few years will be collecting diversity data,setting goals and measuring progress.KEY FINDINGS2 KEY THEMES IN A MORE UNCERTAIN WORLDTHE INVESTMENT ASSOCIATION25INVESTMENT MANAGEMENT SURVEY 2021-22
195、|KEY THEMES IN A MORE UNCERTAIN WORLD21.NAVIGATING A DIFFICULT ECONOMIC ENVIRONMENTThe UK has faced three major shocks in the past five years Brexit,Covid-19 and the economic implications of Russias invasion of Ukraine.In different ways,these have demonstrated the limits of the assumptions around en
196、during and deepening globalisation,while also contributing to supply-side interruptions that have fuelled a growing concern about the potential impact of inflation upon capital markets and investors.For the investment management industry,this creates a number of uncertainties for both the near and l
197、onger term about economic conditions as well as the assumptions underpinning an industry whose investment activity is profoundly global.The headwinds can be summarised in four main themes:Likely consequences of rising interest rates Possibility of permanently higher inflation Potential for significa
198、nt de-globalisation Overall implications for market returns and economic growth“Investors have had to deal with so many issues over the last few years.Youve had Brexit,the pandemic,the impacts of supply chain disruption,the impact of a ground war in Europe and now youve got this huge cost-of-living
199、crisis and inflationary challenge.”For some we spoke to,the big risk is that structural shifts in the global economic,political and security environment create inflationary pressures that are permanent rather than transitory.This in turn will lead to a higher interest rate environment than has been
200、seen over the past two decades.“The biggest risk is that it is a secular move towards a more inflationary environment,in part caused by the decrease in globalization and characterised by higher rates for a long time.”This creates significant challenges both in predicting the direction of markets and
201、 delivering the kind of returns that many investors have become used to over the past 30 years.A number of those we interviewed also highlighted other facets of these challenges.For some,this relates to the importance of drawing on the experience of those used to managing through this kind of enviro
202、nment.“Central bank support has meant that weve been in an almost artificial economic environment.Economic data from the last 20 to 30 years is not necessarily going to be a good guide to the future.We really need to be thinking about scenario analysis and different ways of thinking about risk.”For
203、others,it was notable that technology,including social media,was driving a completely different pace of information dissemination,which meant in turn that client expectations also adjusted accordingly.“Clients have access to online technology and information in real time and theyre seeking answers.L
204、eadership as an investment manager means you have to have opinions on these and lead from the front or be willing to say we dont know yet and were figuring this out.”THE INVESTMENT ASSOCIATION26This in turn has served as a reminder about what is often a more fragile international consensus than some
205、times appears from a UK or broader European perspective:“There is huge political pressure on governments around the world to make sure that any short-term fixes dont negatively impact this longer-term view of sustainability,particularly as clients are already on a sustainability journey and are cont
206、inuing on this journey.As an asset manager,we are still under the same pressures as before from our clients to continue to enhance our sustainable capabilities.”Others within the industry remain optimistic that the climate agenda remains front of mind and that the ongoing war between Russia and Ukra
207、ine has highlighted the need for energy security and could accelerate the transition away from oil and gas to more renewable sources of energy.In the context of Ukraine and the application of sanctions,investors are also increasingly aware of how complex the application of ESG principles is to sover
208、eigns,especially where multiple competing priorities may have to be juggled.“Understanding the ESG ramifications or risks of holding sovereign debt are not black and white.The line is often not as clear and is subjective.One of the critical active management decisions that we need to make as a fund
209、manager is where that line is and it will vary by different countries depending on the everchanging landscape.”2.INVESTING RESPONSIBLY AND SUSTAINABLYReflecting intensifying concerns about the climate,as well as broader environmental and social considerations,sustainable and responsible investment(S
210、&RI)has become a dominant theme within the investment management industry.The strong performance of these products in 2020 may also have accelerated demand.While inflows remained consistently strong through 2021,typically such funds tend to underweight oil and gas companies and overweight technology
211、 companies,a strategy which has dampened performance into 2022.Although the underlying momentum behind S&RI investing is likely to build in the long-term,a number of firms that we spoke to this year are expecting that recent performance may slow near-term demand for S&RI products,which is certainly
212、reflected in lower Q1 2022 net retail sales.“My fundamental belief is that if you buy any asset class and make it greener,that is a source of alpha,but we need a longer time horizon so we can prove that.”A COMPLEX DEBATE ABOUT INTERPRETATION AND APPLICATIONAt the same time,there is a recognition tha
213、t the war in Ukraine has stimulated a wider debate about how precisely to define S&RI and that the economic consequences have potentially weakened some of the consensus and momentum.“The war in Ukraine has highlighted the challenges of ESG assessment in a big way.Clients are asking how we look at co
214、untries like Russia and China from an ESG assessment perspective and how we get rid of our dependency on oil in the short-term.”27INVESTMENT MANAGEMENT SURVEY 2021-22|KEY THEMES IN A MORE UNCERTAIN WORLD2Climate action failure has been identified as the most severe risk to global economic growth8.In
215、 late November 2021 the UK hosted COP 26,the UN conference on climate change in Glasgow.The nations represented are parties to the Paris Agreement to limit global warming and achieve net zero greenhouse gas emissions in the second half of this century.This can only be achieved with significant chang
216、es to the nature of economic activity.Investment managers,as agents of capital,will have a role to support governments in financing solutions to mitigate and adapt to climate change.This includes support of the Governments first Green Gilt issues,and also acting as stewards to scrutinise the prepare
217、dness of the companies and other assets they invest in for the transition to net zero.In the lead up to COP 26,the UK Government issued its first Green Gilt to finance green projects,raising 16 billion.The Debt Management Office has said that a further issuance of at least 10 billion is expected in
218、2022,as the Government seeks to establish a deep and liquid green gilt market.Issuances so far have been heavily oversubscribed,reflecting significant investor demand for green sovereign bonds.Going forward,investors will be closely monitoring reporting from the Government as to the allocation of pr
219、oceeds from the issuances,and the impact they have had.The UKs role in hosting COP 26,and the one-year delay to the conference,helped to build interest in the UK-based industry and created a sense of momentum behind net zero commitments including Net Zero Asset Managers and the Net-Zero Asset Owners
220、 Alliance,which culminated in the formation of the Glasgow Financial Alliance for Net Zero(GFANZ).IA member firms with AUM in the UK of more than 7 trillion(almost three-quarters of UK AUM)have now signed up to the Net Zero Asset Managers BOX 2:RISING IMPORTANCE OF CLIMATE CHANGE AGENDA commitment.T
221、his is a significant industry commitment to support the goal of net zero emissions by 2050.The initial postponement of COP 26 also allowed time for UK policymakers to advance plans for domestic measures,including a UK green taxonomy,TCFD reporting across the economy,a sustainable disclosure and labe
222、lling regime for financial products,and corporate transition plans.Much of this work was merely launched in Glasgow and the detailed work of implementation is ongoing despite a drop in the levels of Government-driven publicity since COP 26,and uncertainty following Boris Johnsons replacement by Liz
223、Truss as Prime Minister.The last year has seen jockeying between the worlds leading economies to set the standard on greening the financial system.The EU,with the establishment of SFDR and a green taxonomy,has been seen as a frontrunner in this area but the UK,as host of COP 26 and in a spirit of po
224、st-Brexit competitiveness,has also wanted to stake a claim to being the worlds first“Net Zero-Aligned Financial Centre”.The US,under the presidency of Joe Biden,has been keen to signal its renewed commitment to climate diplomacy.This is a global issue and for a global industry like investment manage
225、ment,international regulatory coherence will be vital.There are signs that this is being sought through the G20 and the establishment(also at COP 26)of a new International Sustainability Standards Board(ISSB).GFANZ will also have a role as a global,industry-led group,in seeking to influence the adop
226、tion of consistent and high-quality standards.There are some concerns within the industry that rising geopolitical tensions and increasingly difficult macroeconomic market environments could see some of these commitments falter as governments seek to address some of the nearer term challenges.8 The
227、Global Risks Report 2022,World Economic Forum.THE INVESTMENT ASSOCIATION28SIZING THE MARKET FOR SUSTAINABLE AND RESPONSIBLE INVESTMENTThe data presented in Chart 6 is based on the IAs Responsible Investment Framework which was published in 2019.This data includes assets subject to both firm level an
228、d individual fund or mandate level responsible investment approaches.Although we now have three years of data,it is very difficult to make year on year comparisons.IA members ability to extract data from their systems and their interpretation of IA definitions is evolving as we move towards greater
229、consistency.As such,year on year changes are a combination of genuine rising allocations,but also improved data quality.Chart 6 shows that assets within sustainability focused strategies have risen quite substantially from 2.6%in 2020 to 8.1%in 2021.Assets subject to firm level or product level excl
230、usions have seen a two percentage point rise to 28%in 2021.Meanwhile,ESG integration stood at 47%,down from 49%in 2020.Impact investing remains a niche area of investment with a very small number of firms involved in these types of investments.Total assets represent just 0.5%of industry assets and h
231、ave remained at a similar percentage over the last three years.The majority(77%)of industry assets are subject to stewardship activity.Oversight goes beyond just voting,and as such,the 77%figure includes holdings across asset classes.CHART 6:PROPORTION OF ASSETS UNDER MANAGEMENT BY RESPONSIBLE INVES
232、TMENT CATEGORY(2019-2021)ESG Exclusions Sustainability ImpactIntegration focused20212020201960%50%40%30%20%10%0%IA MEMBER FIRMS WITH AUM IN THE UK OF MORE THAN 7TRNNOW SIGNED UP TO THE NET ZERO ASSET MANAGERS COMMITMENT.29INVESTMENT MANAGEMENT SURVEY 2021-22|KEY THEMES IN A MORE UNCERTAIN WORLD2TABL
233、E 2:DEFINITIONS BASED ON IA RESPONSIBLE INVESTMENT FRAMEWORK9 Category Definition ESG Integration Exclusions Sustainability Focused Impact Investing Stewardship The systematic and explicit inclusion of material ESG factors into investment analysis and investment decisions.ESG Integration alone does
234、not prohibit any investments.Such strategies could invest in any business,sector or geography as long as the ESG risks of such investments are identified and taken into account.Exclusions prohibit certain investments from a firm,fund or portfolio.Exclusions may be applied on a variety of issues,incl
235、uding to align with client expectations.They may be applied at the level of Sector,Business activity,products or revenue stream,A company or Jurisdictions/countries.Exclusions determine that a fund or mandate does NOT invest in certain things.It does not constitute an approach that is characterised
236、by proactively allocating capital to specific assets.It may involve excluding investments from a certain sector or investments that derive a portion of their income from the sale of certain specified products.Investment approaches that select and include investments on the basis of their fulfilling
237、certain sustainability criteria and/or delivering on specific and measurable sustainability outcome(s).Investments are chosen on the basis of their economic activities(what they produce/what services they deliver)and on their business conduct(how they deliver their products and services).Investments
238、 made with the intention to generate positive,measurable social and environmental impact alongside a financial return.There are four key elements:1.Intentionality:Impact investments intentionally contribute to social and environmental solutions.This differentiates them from other strategies such as
239、ESG investing,Responsible Investing,and screening strategies.2.Financial Returns:Impact investments seek a financial return on capital that can range from below market rate to risk-adjusted market rate.This distinguishes them from philanthropy.3.Range of Asset Classes:Impact investments can be made
240、across asset classes.4.Impact Measurement:A hallmark of impact investing is the commitment of the investor to measure and report the social and environmental performance of underlying investments.The responsible allocation,management,and oversight of capital to create long-term value for clients and
241、 beneficiaries leading to sustainable benefits for the economy,the environment and society.9 The IA RI framework is avalailable at:https:/www.theia.org/sites/default/files/2019-11/20191118-iaresponsibleinvestmentframework.pdf.THE INVESTMENT ASSOCIATION30IMPROVING DISCLOSUREGlobally,regulators are pa
242、ying significant attention to rising investor interest in responsible and sustainable investing.Regulators are keen to prevent greenwashing,promote a well-functioning sustainable investment market and to set higher disclosure standards for sustainable investment products.The Sustainable Finance Disc
243、losure Regulation for European domiciled funds,and the proposals outlined in the UKs Sustainable Disclosure Requirements,are partly designed to give investors greater confidence that the sustainable products that they invest in match their preferences and expectations.“Some of the focus on sustainab
244、ility is regulatory-driven as well.The regulation is not going away.In fact,its coming at a thundering pace,and we all have to keep abreast of that,particularly here in Europe.”“Labelling is so important today to explain the differences in how funds operate so that consumers can make their own choic
245、e.If they want an ethical fund that excludes oil and gas,or if they want a fund that will try and change oil and gas stocks to make them greener,they need to be able to clearly understand that.The need for clear labelling has never been more important.”Clear disclosure is the central tenet of the FC
246、As Dear AFM Chair Letter of summer 2021 on improving quality and clarity of authorised ESG&sustainable investment funds.The FCA builds upon the principles outlined in the letter in its Discussion Paper 21/4,published in December 2021,whilst also setting out proposals for a UK sustainable fund labell
247、ing regime.Investment managers will have to demonstrate good quality of governance and stewardship,a robust sustainable investment process and provide clear communications and disclosure to meet the sustainable label criteria.Consultation on SDR is likely to conclude by Winter 2022,with rules to be
248、published in 2023.10 As pictured in the FCAs Discussion Paper 21/4 released November 2021.Not promoted as sustainableResponsible(may have some sustainable investments)Transitioning(sustainable characteristics,themes or objectives;low allocation to Taxonomy-aligned sustainable activities)Aligned(sust
249、ainable characteristics,themes or objectives;high allocation to Taxonomy-aligned sustainable activities)Impact(objective of delivering positive environmental or social impact)SustainableNote:The five blocks in this Figure represent potential categories of product in the classification and labelling
250、system.Each would be supported by clear definitions and criteria.FIGURE 7:THE FCAS POTENTIAL APPROACH TO A SUSTAINABLE PRODUCT CLASSIFICATION AND LABELLING SYSTEM1031INVESTMENT MANAGEMENT SURVEY 2021-22|KEY THEMES IN A MORE UNCERTAIN WORLD2IA investor research into sustainable labels showed that inv
251、estors welcomed the concept of a label,preferring a clear and simple framework that helps them to more easily navigate the expanding sustainable fund market.However,the development of label criteria and proposals around setting thresholds for sustainable assets has highlighted challenges regarding t
252、he availability of data and common metrics to assess sustainable investment outcomes.There is not yet a clear quantitative methodology to determine a sustainable asset.In the EU,the development of a taxonomy could help investment managers to map the revenue alignment of companies to environmental ac
253、tivities,but the taxonomy is unfinished.In the UK,a taxonomy is being developed but is not available yet.Even then,metrics will have an environmental focus and whilst an EU social taxonomy is being planned,it is not yet under development.This makes it difficult to set allocation thresholds according
254、 to environmental,social and governance criteria until more comprehensive data and consistent metrics become available.Investors may be better served by a first generation of sustainable fund labels that require fund managers to demonstrate sustainability through the intentions of the investment pro
255、cess.If a fund can prove that it is selecting stocks or bonds based on financial and non-financial criteria and can evidence and explain this effectively to customers,this could be a good starting point for a label.“Reporting and measurement and making sure that there is consistency is really diffic
256、ult when youre pursuing different sustainability goals.Metrics that look at who achieved their goal and by how much will level the playing field.”3.ONGOING FOCUS ON PRIVATE MARKETS Global assets in the private markets have increased significantly once again,rising 22%to over$10 trillion in 2021.Priv
257、ate equity remains the most significant asset class in the alternative investment space,accounting for almost two thirds(or$6.6 trillion)of global AUM.Although significantly smaller at$950 billion,total AUM in infrastructure assets has seen the most notable growth over the last decade,growing 16%on
258、average each year compared with a compound annual growth rate of 13%for total private market assets.CHART 7:GLOBAL ASSETS UNDER MANAGEMENT IN PRIVATE MARKETS(2006-2021)12108642020062007200820092010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20202021Private equity Real estate Infrastructure Private
259、 debt Natural resources$trn$1.7$2.2$2.2$2.4$2.7$3.0$3.3$3.8$3.9$4.2$4.5$5.2$6.0$7.1$8.5$10.3 Source:PreqinTHE INVESTMENT ASSOCIATION32The growth in private markets is driven by both demand and supply-based factors.On the supply side there is increasing interest in market-based finance including in t
260、he context of financing the UKs transition to net zero.At the same time,as Chart 8,we have also seen a fall in the number of companies that are publicly listed.Increasingly,we see companies choosing to stay private for longer.The number of unicorns privately held companies with a valuation in excess
261、 of$1 billion increased by 71%between 2019 and 2022 alone,according to data provider PitchBook.This means that investors will need to increasingly look at private markets if they want to benefit from some of these high growth companies.CHART 8:NUMBER OF UK LISTED COMPANIES OVER FOUR DECADES(1976-202
262、1)197719791981198319851987198919911993199519971999200120032005200720092011201320152017201920213,5003,0002,5002,0001,5001,0005000 Source:World Bank,London Stock Exchange.Although IA member firms have expertise in private markets,large parts of the market,notably private equity,lie outside of the IAs
263、membership.This year,the IA collected data on the level of investments in private markets by IA members.While overall exposure is quite low at approximately 3%of total AUM,many industry leaders believe that the current market environment will see demand for alternatives accelerate.The number of IA f
264、irms offering private market solutions remains concentrated for now,with some cautious about entering what they see as a specialised space.As the market cycle turns,there is also increasing caution about valuation,which further emphasises the previous point.“Youre going to see things like alternativ
265、es play a bigger part of the investment landscape.I would caution the industry-we need to play to our strengths.If you are a firm that hasnt done these types of things before,enter carefully.”33INVESTMENT MANAGEMENT SURVEY 2021-22|KEY THEMES IN A MORE UNCERTAIN WORLD2There are three sets of challeng
266、es facing the LTAF as it starts to develop in the UK:Regulatory barriers,given tight initial rules on distribution which focus the LTAF on the DC pensions market rather than private wealth and retail.This may start to change following regulatory consultation in the second half of 2022 about widening
267、 retail access to the LTAF.Operational frictions given that investment platforms are primarily geared towards daily dealing and generally need to adapt to support the use of notice periods.Commercial behaviours,partly driven by regulation,notably the DC default fee cap,which are resulting in a very
268、cost-focused assessment of value in the UK investment management market.IA research found 46%of wealth managers think that costs are one of the top three barriers to investing in private markets.This may be a big barrier for the most cost sensitive investors and product providers will need to be abl
269、e to communicate the value proposition of their product.Regulatory reforms in the institutional market could also lead to increased allocations to private markets.In Spring 2022,HM Treasury began consulting on proposed reforms to Solvency II,the framework governing the prudential regulation of UK in
270、surers.One of the core objectives underpinning the review is to support insurance firms to provide long-term capital to promote growth,including investment in infrastructure,venture capital and growth equity,and other long-term productive assets,as well as investment consistent with the governments
271、climate change objectives.The broadening out of eligible asset classes could see insurers,who make up 11%of the industrys client base,increase allocations to private markets.ACCESSING ILLIQUID ASSETS Access to private markets has historically been much more straightforward for institutional investor
272、s than for those in the private wealth,retail and DC pension markets.As private markets continue to grow and become an increasingly significant part of the economy,there is an ongoing debate about how to widen access,including expansion of the range of fund vehicles available.In the wealth managemen
273、t space,IA research has found that among the pool of wealth managers that are not invested in private markets,40%cite a lack of appropriate fund structures as a barrier to investing.In November 2021,the rules for the Long-Term Asset Fund(LTAF)a new form of investment fund using notice periods were f
274、inalised and the first LTAFs are expected to be launched through 2022-2023.“Private markets,including infrastructure and property,really were the domain of the institutional market and theyre becoming much more needed in the retail,advisory and wealth management market.This is where the Long-Term As
275、set Fund comes in.”The LTAF better aligns the liquidity of the underlying asset class that the units are invested in with the dealing frequency of the fund so that units can only be sold at set intervals,for example every 3 or 6 months,or even less frequently.THE INVESTMENT ASSOCIATION344.ACCELERATI
276、NG PACE OF OPERATIONAL MODERNISATION The Covid-19 crisis highlighted the need for the fund management industry to accelerate the move away from paper towards digital,having previously been slower than other parts of the financial services industry to move in this direction.There are a variety of rea
277、sons for this,some operational,some regulatory.However,the industry recognises that the fundamental impetus needs to come from within,and the pandemic has both triggered new and intensified existing initiatives for change.These are addressing some of the more obvious frictions that still exist in th
278、e customer experience,for example the comparatively slow pace of fund transfer when moving to or between investment platforms.Looking ahead,the industry is keen to work with regulators on a more ambitious,broader agenda across multiple areas,from operational process through to product design and cus
279、tomer interaction.A major focus in all eventualities will need to be the digitalisation of communication and disclosure,which remains anchored in paper-based regulated documents that heavily impact current information and design requirements.However,there is also scope for a more significant evoluti
280、on of the funds industry.A recent IA paper,Investing for the Future,highlighted potential ways in which utilising new technologies and adopting tokenisation could fundamentally change the way in which the industry operates.It uses the concept of Investment Fund 3.0,a new stage of fund development,to
281、 explore potential scenarios for the future.“The case for tokenisation is pretty strong.Its the delivery mechanisms that have an opportunity to continue to improve and decrease the overall cost for consumers.To the extent that technology can take out friction in the middle,I think thats a huge advan
282、tage.”“Weve been a laggard in adoption of key technological trends and I think thats going to change.Digitalisation and tokenisation of the product will definitely come.”At the most radical end,a transformative shift could instead provide a much more interactive and participatory experience for inve
283、stors via hyper-customisation.Risk and return exposure could be tailored by customers at individual stock and securities level,rather than at the fund level.This level of customisation is achieved through changing the relationship between the customer and their portfolio,increasing participation and
284、 altering the nature of delegation to a professional investment manager.The creation of personalised ETFs today offers a glimpse of the future.Increasingly this high degree of tailoring will link together with Distributed Ledger Technology and the tokenisation of assets.Tokenising less liquid assets
285、 such as property would enable them to be held more easily in open ended funds such as ETFs.Beyond funds,we will see further personalisation of the portfolio in its broadest sense by providing access to a range of financial products that meet investors wider needs.For example,portfolios could hold r
286、ainy day savings accounts and protection products such as life insurance.The standard off-the-peg approach will no longer suffice.The investment management industry of the future could look very different from todays.“Weve taken advantage of the generous opportunities created by Fintech innovation h
287、ere in the UK.We make good use of the rich ecosystem of new service providers on the investment research,technology,operations and back-office arenas.Weve had lots of opportunity to experiement with and adopt several new providers.”35INVESTMENT MANAGEMENT SURVEY 2021-22|KEY THEMES IN A MORE UNCERTAI
288、N WORLD2FIGURE 8:THREE SCENARIOS FOR INVESTMENT FUND 3.0The first scenario extrapolates the enhancements of recent times into the future and produces a more efficient version of todays fund.In this baseline view which underpins the others,the industry continues its modernisation agenda,facilitating
289、speed,scale and efficiency,utilising new technologies and adopting tokenisation to enable fund shares and underlying asset classes to be traded more effectively.Consumers will benefit from incremental improvements to customer experience and be able to interact in a more informed manner with their pr
290、oviders.SCENARIO ONE:Business-as-usual enhancement1The second scenario builds upon these enhancements and sees an evolution of greater significance,which results in an adaptation of fund operations and product delivery to suit new investor appetites and expectations.The conventional collective inves
291、ting model develops through increasing numbers and diversity of thematic and specialist investment building blocks to help construct overall portfolios which are much more tailored to investor preferences.The extent of tokenisation in this view broadens market access much more significantly in areas
292、 such as private companies,infrastructure and native digital assets.SCENARIO TWO:Innovative evolution2At the more radical end,the third scenario imagines a transformative shift where a much more interactive and participatory experience for investors is facilitated via hyper-customisation,and where r
293、isk and return exposure is tailored by customers at individual stock and securities level,rather than at the fund level.As in the second scenario,this includes investible assets outside of the current mainstream,such as infrastructure and native digital assets.This level of customisation is achieved
294、 through changing the relationship between the customer and their portfolio,increasing participation and altering the nature of delegation to a professional investment manager.SCENARIO THREE:Transformative change3THE INVESTMENT ASSOCIATION365.OPPORTUNITIES FOR GROWTH The UK investment management ind
295、ustry is a leading centre of excellence and one of the most international in the world,in terms of both the customers and businesses we serve and the assets that we invest in.The UK has several well-documented advantages which have bolstered its position as a leader in investment management on the g
296、lobal stage,including time zone,language,and a stable legal system.The latest data in this report confirm the strongly international nature of the UK investment management industry,particularly when measured in terms of the overseas customer base,overseas investment activity(across both equity and f
297、ixed income)and the level of delegation to facilitate portfolio management for overseas-domiciled funds(see Figure 9).However,there is clearly no room for complacency,either at the level of UK-EU relations or the broader macro-economic,political and security environment.This may drive a move to re-r
298、egionalisation or localisation,threatening or reversing the globalisation trends that have been so dominant over the past two decades.“Geopolititcal risk is the biggest risk that we face as an industry.We have started to see an uncoupling of globalisation.We are seeing the breakdown of supply chains
299、,barriers to trade going up,the inability to move labour between markets.Increased nationalism will increase barriers and lead to poorer outcomes.”IA members have identified several opportunities that will help to foster the UKs international competitive advantage in fund delivery and broader portfo
300、lio management.Innovation and sustainable finance continue be critical themes:FIGURE 9:FOUR MEASURES OF A GLOBAL INDUSTRY IN 2021CUSTOMERS46%of total assets managed in the UK are for overseas customers.Over half of those are in the rest of Europe.MARKETS77%of the shares managed in the UK are investe
301、d in overseas markets for domestic and overseas customers.COMPANIESThe UK attracts firms from around the world.Companies headquartered outside the UK are responsible for 60%of total assets managed here.ECONOMIC CONTRIBUTION3.6%of total UK service exports from the investment management industry.37INV
302、ESTMENT MANAGEMENT SURVEY 2021-22|KEY THEMES IN A MORE UNCERTAIN WORLD21.A system that prioritises innovation.Innovation is partly about the practical application of technological advances,and there is clear scope in areas such as tokenisation to drive further development of both investment fund and
303、 capital markets.At the same time,innovation is much bigger than technology alone.Developments in product offerings such as the Long-Term Asset Fund(LTAF),which facilitate access to asset classes that were once out of reach for many investors,will be key in demonstrating an ability to innovate,with
304、both domestic and international benefits.2.Sustainable finance is seen as one of the biggest exportable opportunities in UK investment management today.The worlds leading economies have committed to set the standard on greening the financial system.Whilst the EU has been first to set out a firm set
305、of rules and regulations by establishing SFDR and a green taxonomy,the UK can learn from the challenges seen in implementing SFDR to drive better regulation.It is also taking the opportunity to capitalise on the momentum behind COP 26 to become the first“Net Zero-Aligned Financial Centre”.The UK has
306、 a strong pool of talent and as demand increases for staff with sustainable investment expertise,this will further support the UKs position as a centre of excellence for S&RI.“There is a big opportunity for the UK around the regulatory environment for sustainable finance.The UK can be a leader in te
307、rms of creating a product construct within sustainable finance that operates globally.”One of the critical ingredients in making these areas a success will be the strength of domestic talent.The success of city hubs,such as London and Edinburgh,is rooted in the broader ecosystem which includes the p
308、roximity to other market participants and fintechs,availability of broader professional services,and,critically,access to talent.Talent continues to be a key differentiator,particularly in the race to become leaders in sustainable finance,and many believe that the UK is well-positioned in terms of p
309、rofessional capabilities in this area.“Its a war of talent and will continue to be so and I think the talent for sustainable finance is in the UK today.So,the question is,will that just shift straight to the US when they eventually catch up?”THE INVESTMENT ASSOCIATION38“The UKs investment management
310、 ecosystem is well-established and quite unique.We are generally leading on tech and FinTech and that will remain key and I see a great capacity to innovate.We also continue to see the UK as having a very deep talent pool.We need to protect that ecosystem.”CHALLENGES TO UK COMPETITIVENESS At the sam
311、e time,there are growing concerns from the industry about the relative competitiveness of the UK as an operating environment that can both attract and retain global businesses.A range of issues tend to surface among industry participants,including the rising cost of doing business in the UK and incr
312、easing regulatory burden.The issue is not one of a trade-off between competitiveness and customer protection.Firms feel that high degrees of customer protection are wholly compatible with a policy and regulatory regime in the UK that sees international competitiveness as a net gain in terms of both
313、domestic delivery and broader economic contribution.Rather,a critical question is how efficient,effective and adaptive the regulatory regime is in practice?“Theres a very big risk that we are launching initiatives that really are only going to be fit for purpose for a few years.Theyve got no way of
314、evolving because of the way that that regulation has been set up.Really,you want propositions that can evolve as we learn.”There is also a real emphasis across the industry on ensuring that the international talent pipeline so necessary for its success is as strong as possible,alongside further meas
315、ures to foster a more diverse and inclusive recruitment culture.“Other countries across the globe are making it a lot more friendly to do business for people who have interest in cryptocurrencies and DLT.Some countries will offer a digital visa.Is there a sensible opportunity for the UK to be doing
316、that in any way to facilitate different types of business?”Assets within sustainability focused strategies have risen quite substantially from 2.6%in 2020 to 8.2%IN 2021 39INVESTMENT MANAGEMENT SURVEY 2021-22|KEY THEMES IN A MORE UNCERTAIN WORLD26.ENHANCING DIVERSITY&INCLUSION ACROSS THE SECTORDiver
317、sity,equity and inclusion(DEI)are widely recognised as strategic priorities,as businesses shape the future world of work following the disruptions of the last few years.Businesses are responding to changes in societal expectations of creating outcomes by offering wider perspectives.This in turn redu
318、ces the risk of group think.Furthermore,firms are increasingly being evaluated against a wider set of criteria,which includes the diversity of the workforce and being able to evidence this with data across different career levels.The regulators too have expressed their expectations for businesses to
319、 take action that measures and addresses workforce diversity and inclusion as part of risk mitigation.“When youre making a reversal of a generational long-term issue,it takes a while to build momentum,but it will build.”The ability to build and lead diverse teams has become increasingly important as
320、 leaders strive to create an inclusive work culture that develops and retains good talent.As part of this,we are seeing a shift in focus from the diversity of the workforce,to include a broader recognition that equity and inclusion play a prominent role in helping to level the playing field for recr
321、uitment and advancement.This broader focus also helps to create a culture of employee belonging.There has been progress on diversifying entry-level talent but there is recognition that more needs to be done to ensure that our industry benefits from these efforts through the retention,development and
322、 progression of talent into senior positions.Strides have been made in addressing under representation in gender,ethnicity,and socio-economic characteristics but there is still much work to be done when it comes to including these under-represented groups in decision-making and investment roles.“The
323、 market has woken up to the fact that we need to grow our own talent and create opportunities around the talent we have.We will see more of a shift to internal development rather than simply trying to poach other peoples diverse talent.”Capturing diversity data,setting goals and measuring progress i
324、s recognised as a crucial component to achieving DEI results but more progress is needed.Businesses are shifting approach to reduce internal drivers of inequality and are taking a more holistic approach so that these issues are not addressed in isolation.More investment management leaders are now at
325、 the forefront of driving lasting cultural and behavioural change and are committed to integrating DEI into all their processes.“We spent a long time last year collecting diversity data and it does help because you can start to measure change.Data is the first and hardest thing to get and in some co
326、untries you cant collect the data.You manage what you measure better.”40THE INVESTMENT ASSOCIATION3 TRENDS IN CLIENT ASSETS AND ALLOCATIONCLIENT AND MANDATE TYPE In 2021,institutional clients continued to account for the majority(77%)of industry assets.Assets managed on behalf of retail clients incr
327、eased for the second year in a row,rising two percentage points from 20%to 22%.Assets managed on behalf of pension clients,the single largest client group,dipped to 40%,five percentage points lower than in 2018.The proportion of assets that sit within segregated mandates versus pooled investment veh
328、icles has seen little change over the last decade.In 2021,53%of assets were managed on a segregated basis,which is unchanged on the previous year.ASSET ALLOCATION The proportion of the asset base invested in equities has increased for the third year in a row,rising three percentage points in 2021 to
329、 42%of total assets.The proportion of fixed income assets fell two percentage points to 30%,reflecting the volatility observed in fixed income markets in 2021.Looking at a regional breakdown of equity holdings,the largest change in 2021 has been the proportion of total equity investments held in Nor
330、th American equities,which rose a substantial six percentage points over the year to 30%.Holdings in UK equities continued to fall in 2021,dipping to 23%which is a 14 percentage point fall over the decade.This meant that for the first time,UK equities were overtaken as the largest region for equity
331、investments.Diversification of holdings through investment in overseas markets is also a theme in the regional fixed income holdings.Over half(55%)of fixed income assets are held in overseas bonds,compared with one third of holdings a decade ago.INVESTMENT IN THE UK ECONOMY Total investment in the U
332、K economy across UK equities,sterling corporate bonds,UK infrastructure and commercial property stood at 1.6 trillion in 2021,a small dip on the 1.7 trillion reported in 2020.In 2021,UK infrastructure investments held by IA members stood at 40 billion,which has been broadly unchanged for a number of
333、 years now.This figure is largely(70%)made up of investments in economic infrastructure projects with a smaller proportion(30%)invested in social infrastructure projects.A large number of the economic infrastructure projects are focused on renewable energy,primarily wind and solar farms.Social infrastructure projects are largely investments in public buildings related to healthcare and education.G
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