Short of cash: Industry revenue still below pre-recession figures despite industry growth
London, United Kingdom (PRWEB) September 20, 2013
The Fund Management Activities industry in the United Kingdom is the second largest in the world and the largest in Europe. Funds under management (FUM) by the industry are expected to reach £4.7 trillion in 2013-14. Industry revenue comes predominantly from management fees, which are normally calculated as a percentage of FUM. The industry is expected to grow at a compound annual rate of 2.2% over the five years through 2013-14 to reach £13.3 billion. Although this suggests that the industry performed reasonably well at a time when financial markets witnessed considerable volatility and funds from institutional and retail investors were significantly constrained, the industry's growth is primarily attributable to the significant decline in industry revenue recorded in 2008-09, which is the base year of the five-year period. As a result, industry revenue is below the levels recorded prior to the financial crisis, in real terms. Industry FUM followed a similar trend and is expected to be lower when compared with the value of FUM recorded in 2006-07, in real terms.
In 2013-14, revenue is expected to increase 3.3%, and is likely to be driven by a marginal upturn in financial markets. According to IBISWorld industry analyst Iyman Uvais, “the gradual recovery of the global economy, coupled with significant quantitative easing activity and other stimulus measures will improve investor sentiment”. Meanwhile, institutional funds are also expected to flow in to the industry. However, despite favourable conditions, considerable uncertainties such as the possible tapering off of quantitative easing programmes exist. This could hinder industry performance.
Industry growth will be held back early in the short term due to financial market volatility. This will be attributable to potential problems in the eurozone, stunted growth in key emerging markets and slow recovery in the United Kingdom. The possible introduction of a financial transaction tax and the gradual tightening of monetary policy could also harm the industry. Uvais adds, “in the long term, the industry should return to stronger growth, driven by more buoyant equity markets, rising ageing population, increasing funds from emerging economies and rising retail demand for investment products.” During the five years through 2018-19, both industry revenue and FUM are forecast to increase.
The top four UK fund management firms operating in the industry is expected to manage a combined total of 28.0% of FUM in the industry in 2013-14. This indicates that the industry has a low level of industry concentration. The 10 largest fund managers manage a combined total of approximately 52.0% of all FUM. The industry is characterised by a small number of large firms in terms of asset size, which then rapidly decreases to a long tail of medium to small-size firms. Concentration in the industry has been increasing over the five years due to acquisition activity by some of the largest players.
The market share of industry revenue of the top four players is lower than their FUM share. There may be a number of reasons for this difference. Larger market players may have a lower annual management charge due to economies of scale and the nature of the investment products provided (for example, the share of passive to active investment products or retail to institutional clients). Major companies include BlackRock and Legal & General Group.
For more information on the Fund Management Activities industry, including latest industry trends, statistics, analysis and market share information, purchase the full report from IBISWorld, the nation’s largest publisher of industry research.
IBISWorld industry Report Key Topics
This industry includes portfolio and fund management activities provided on a fee or contract basis for individuals and businesses. It covers firms operating and managing assets in the United Kingdom for both domestic and overseas clients.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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