Institutional and retail investors are investing increasingly in solutions-based strategies, according to the Investment Association’s annual survey of the UK asset management industry.

As at the end of 2015, some £5.7trn (€6.6trn) of assets were managed by members of the IA, the same as the revised figure for 2014 but representing 8% growth per annum over the last decade, according to the survey.

Eighty percent of the assets managed in the UK as at the end of 2015 are managed for institutional investors, with pension funds remaining the largest client group, at 40%.

In terms of asset allocation, alternative asset classes are growing in importance.

“[A]llocations outside the mainstream asset classes continued to increase, reaching 19% by the end of 2015,” said the IA.

“More than half of assets in this category are now represented by ‘solutions-based’ strategies, as both institutional and retail investors diversify more widely and focus more on investment outcomes.”

Large European pension investors recently announced a commitment to investing in “solutions” that contribute to meeting the UN Sustainable Development Goals.

According to the IA survey, equity and fixed income allocations fell by 1 percentage point, to 39% and 33%, respectively.

Property and cash holdings remained stable at 3% and 6%, respectively.

The association said the survey shows institutional investors are shifting away from specialist portfolios back to multi-asset mandates, with institutional assets in multi-asset mandates increasing to 23% by the end of 2015.

It said this was probably, at least in part, due to the shift from defined benefit (DB) to defined contribution (DC) schemes, with the latter using multi-asset strategies more.

“The shift to DC, in turn, continues to blur the definitional boundary between retail and institutional business,” said the IA.

Interest in liquid alternative investments continued to increase, with 2015 marking the first time that growing interest was reported among retail investors.

Brexit prep

The IA also linked its survey to the UK’s vote to leave the European Union and preparations for Brexit, noting that the investment industry had “benefited from the free movement of people across the EU” and that “continued access to talent globally is of utmost importance if the industry is going to continue to prosper”.

According to the IA, at the end of last year, the UK-based asset management industry ran £1.2trn of assets on behalf of European clients, representing some 37% of total European assets, more than the French, Germany and Italian industries combined.

It also noted that the ownership of UK-based asset managers was increasingly international, with US-owned firms operating in the UK now accounting for 47% of the industry’s AUM.

Chris Cummings, chief executive at the IA, said: “The industry is now considering the ramifications of Brexit in earnest, and the focus must be on seizing the opportunities that are being presented to continue to grow the UK’s investment hub globally. 

“The UK asset management industry can, should and will be able to continue to serve thousands of European customers in the future, and there is an exciting opportunity ahead to grow our presence in new and exciting markets the world over.”

The IA’s survey comes as French financial regulators this week launched an initiative to encourage UK-based financial firms to set up shop in France.

The Autorité de contrôle prudentiel et de résolution (ACPR), the financial supervisory authority, and the Autorité des marchés financiers (AMF), the securities regulator, said: “As all players in the Paris financial market are gearing up for the challenges posed by Brexit, [we] are getting ready to welcome British-based institutions that wish to locate their business in France.”

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