INVESTMENT MANAGEMENT 
IN THE UK 2019-2020
The Investment Association Annual Survey
September 2020

2
CONTENT ENQUIRIES
Sarah Shehabi, +44 (0)20 7831 0898

CONTRIBUTORS
Sarah Shehabi
Ruth Meade
Miranda Seath
Jonathan Lipkin
Richard Hale
The Investment Association (IA)
Camomile Court, 23 Camomile Street, London, EC3A 7LL
www.theia.org
@InvAssoc
September 2020
© The IA (2020). All rights reserved.
No reproduction without permission of the IA.

3
INVESTMENT MANAGEMENT SURVEY 2019-20 | CONTENTS
CONTENTS
Index of Charts, Figures and Tables	
5
About the Survey	
8
Survey Foreword	
10
Executive Summary	
12
1. UK INVESTMENT 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	
18
	
	
UK investment management in European and global context	
19
	
	
Overseas client market	
20
	
	
Services to overseas funds	
21
	
	
Importance to UK service exports	
21
2. LESSONS FROM 2020 AND CHALLENGES AHEAD 	
22
	
Operational lessons	
24
	
1: The fundamental importance of risk management	
24
	
2: Resilience and the necessity of investing further in technology	
25
	
3: The growing significance of the diversity and inclusion agenda	
27
	
Wider challenges and opportunities	
30
	
1:  Defining a clear role for industry in the economic recovery	
30
	
	
Income and the role of the dividend	
32
	
2:  Delivering value for customers in a difficult economic environment	
33
	
	
Liquidity and widening sources of return	
33
	
	
Time for a new fund vehicle to access illiquids?	
34
	
3:  Setting the agenda for responsible and sustainable investment	
35
	
	
Responsible investment delivery	
37
	
	
Sizing the market for responsible investment	
37
	
4: Enhancing UK international standing in the context of Brexit	
39
3. TRENDS IN CLIENT ASSETS AND ALLOCATION	
42
	
Client types	
43
	
	
Historic evolution of client assets	
44
	
Segregated vs. Pooled	
45
	
Asset allocation	
45
	
	
Growth of private markets	
46
	
Detailed asset allocation	
47
	
	
Equity by region	
47
	
	
Fixed income by region	
48
	
	
Growth of indexing market	
49
	
	
ETF market	
50
	
Investment in the UK economy	
52
	
	
Investment in UK infrastructure	
53

THE INVESTMENT ASSOCIATION
4
4. UK INSTITUTIONAL CLIENT MARKET	
55
	
Market overview	
56
	
	
Client breakdown	
56
	
Evolution of pension market	
57
	
	
Institutional client behaviour through Covid-19	
58
	
	
Sizing the market	
59
	
	
The impact of Covid-19 on the DC pensions sector	
60
	
Trends in the third party institutional market	
64
	
	
Mandate breakdown	
64
	
	
Investment trends within specialist mandates	
66
	
	
Active vs indexing	
68
	
	
Segregated vs pooled	
69
5. RETAIL FUND MARKET	
70
	
UK investor funds under management	
72
	
	
UK investor FUM by asset class	
73
	
Covid-19 and changing patterns of retail fund sales	
73
	
	
Comparing the pattern of retail sales with previous crises	
79
	
UK equities – the erosion of home bias	
80
	
	
Impact of the Brexit referendum on net retail sales	
80
	
	
Comparatively weak FTSE All-Share total returns	
81
	
	
The profile of companies listed on the FTSE	
82
	
Increasing interest in index tracking funds	
83
	
Responsible and sustainable investment	
86
	
UK investors and overseas domiciled funds	
87
	
	
Overseas investors in UK domiciled funds	
89
	
Sales by distribution channel	
89
	
	
Sales to tax wrappers	
90	
	
	
Investor average holding periods	
92
	
European domiciled funds	
92
6. OPERATIONAL AND STRUCTURAL ISSUES	
94
	
Revenue and costs	
95
	
Employment in the investment management industry	
96
	
	
Direct employment	
97
	
	
Distribution of staff by activity	
97
	
Industry concentration	
99
	
Boutiques	
101
	
Asset manager ownership	
102

5
INVESTMENT MANAGEMENT SURVEY 2019-20 | INDEX OF CHARTS, FIGURES AND TABLES
CHARTS
Chart 1: Total assets under management in the UK and in UK funds (2004-2019)	
16
Chart 2: UK-managed assets by UK regional headquarters (June 2009-2019)	
18
Chart 3: Proportion of assets managed for UK and Overseas Funds (2015-2019)	
21
Chart 4: Export earnings of fund managers and contribution to services exports (1997-2018)	
21
Chart 5: Proportion of assets under management by responsible investment category	
38
Chart 6: Assets managed in the UK by client type 2019	
43
Chart 7: Proportion of assets managed in the UK by client type (2009-2019)	
44
Chart 8: Assets managed in the UK by client type (2009-2019)	
44
Chart 9: Segregated versus pooled investment (2009-2019)	
45
Chart 10: Overall asset allocation of UK-managed assets (2009-2019)	
45
Chart 11: Global assets under management in private markets (2009-2019)	
46
Chart 12: Number of companies listed on UK markets (1975-2019)	
47
Chart 13: UK-managed equities by region (2009-2019)	
48
Chart 14: Allocation of UK-managed fixed income by type and region (2011-2019)	
48
Chart 15: Indexing strategies as proportion of total UK assets under management (2009-2019)	
49
Chart 16: ETF Assets under management by region of domicile (2009-2019)	
50
Chart 17: Drivers of 2019 growth in ETFs	
50
Chart 18: Total assets by European domicile (2009 – 2019)	
51
Chart 19: Proportion of European assets under management by asset class (2009-2019)	
51
Chart 20: UK institutional market by client type	
56
Chart 21: UK institutional market by client type (2011-2019)	
57
Chart 22: Pension participation for private sector jobs	
60
Chart 23: DC members by scheme type	
60
Chart 24: Third party UK institutional client market by client type	
64
Chart 25: UK third party institutional client mandates including LDI	
64
Chart 26: Notional value of LDI (2011-2019)	
65
Chart 27: UK third party institutional client mandates: Multi-asset vs. specialist	
65
Chart 28: UK third party institutional client mandates: Multi-asset vs. specialist (2011-2019)	
65
Chart 29: DC asset allocation, 30 years prior to retirement and at retirement	
66
Chart 30: Specialist mandate breakdown by asset class (2011-2019)	
66
Chart 31: Specialist mandate breakdown by asset class	
67
Chart 32: UK DB pension fund asset allocation (1996-2019)	
67
Chart 33: Specialist mandate breakdown by asset class among UK pension funds	
68
Chart 34: Active and index third party mandates by client type (sample-adjusted)	
68
Chart 35: Segregated and pooled mandates by institutional client type	
69
Chart 36: Segregated and pooled mandates among third party pension funds	
69
Chart 37: Total industry funds under management (2004- June 2020)	
72
Chart 38: Drivers of industry growth (1980 to 2020 June)	
72
Chart 39: FUM by asset class (2004-2020 June)	
73
Chart 40: UK Investor FUM by asset/fund sector	
73
Chart 41: Monthly total net retail sales – 2019 to June 2020	
74
INDEX OF CHARTS, 
FIGURES AND TABLES

THE INVESTMENT ASSOCIATION
6
Chart 42: Net retail sales by asset classes (2019 - June 2020)	
74
Chart 43: Net retail sales by equity region (2019 - June 2020)	
75
Chart 44: Fixed income, monthly net retail sales by sector (2019 - June 2020)	
75
Chart 45: Net retail sales by type of property fund (2010-2020)	
76
Chart 46: Cumulative net retail sales by investor objective pre-2008 and post-2008	
77
Chart 47: Net Retail Sales by investor objective (2005 - June 2020)	
77
Chart 48: Net retail sales to targeted absolute return funds by asset category (2010- June 2020)	
78
Chart 49: Net retail sales to the Volatility Managed sector split by funds managing to low, mid and 
                   high volatility bands	
78
Chart 50: Total sales as a percentage of FUM through crises	
79
Chart 51: Net retail sales (2005- June 2020)	
79
Chart 52: Net retail sales, UK equity sectors (2015 - June 2020)	
81
Chart 53: Major global equity markets total return (2015 - June 2020)	
81
Chart 54: FTSE All-share total return and capital return (1985 - June 2020)	
81
Chart 55: Major global equity markets cumulative dividend payments (2015 - June 2020)	
82
Chart 56: Comparison of the weighting by industry sector of the FTSE All-Share and Russell 3000	
82
Chart 57: Active funds and indexing funds as a proportion of total funds under management (2004-2020 June)	
83
Chart 58: Drivers of index fund growth (2013 - June 2020)	
84
Chart 59: Net retail sales by indexing funds and active funds pre- and post-2014	
84
Chart 60: Net retail sales to active and index tracking funds (2010 - Q2 2020)	
85
Chart 61: Net retail sales of indexing funds by index investment type (2010- June 2020)	
85
Chart 62: Responsible Investment FUM (2019 - June 2020)	
86
Chart 63: Responsible Investment net retail sales by asset class (2019 - June 2020)	
86
Chart 64: Responsible Investment active sales and industry active sales (2019 - June 2020)	
87
Chart 65: UK investor FUM in overseas domiciled funds (2017- Q2 2020)	
87
Chart 66: UK investor FUM by fund structure (2012- June 2020)	
88
Chart 67: UK investor net retail sales by fund structure (2012 - June 2020)	
88
Chart 68: UK domiciled funds by investor profile (2017-Q2 2020)	
89
Chart 69: Gross retail sales by distribution channel (2013-2019)	
89
Chart 70: Net retail sales by distribution channel (2013-2020)	
90
Chart 71: Net retail sales to tax wrappers through UK fund platforms (2010 - June 2020)	
90
Chart 72: Total assets in stocks and shares ISAs by type of asset (2012 – 2019)	
91
Chart 73: Total subscriptions to cash and stocks and shares ISAs (08/09 -18/19)	
91
Chart 74: Retail investor average holding periods (2005–2019)	
92
Chart 75: Europe-wide UCITS net sales (2018 - Q1 2020)	
92
Chart 76: Assets in UCITS and AIFs by domicile	
93
Chart 77: Distribution of asset manager profitability (2019)	
95
Chart 78: Industry direct headcount estimate vs. UK assets under management (2009-2019)	
97
Chart 79: Direct employment by staff segment (2015-2019)	
98
Chart 80: IA member firms ranked by UK assets under management (June 2019)	
99
Chart 81: Market share of largest firms by UK assets under management vs. HHI (June 2009-2019)	
100
Chart 82: Top ten firms by UK-managed and global assets under management 	
101
Chart 83: Assets under management by region of parent group headquarters – ten year comparison	
102
Chart 84: Breakdown of UK assets under management by parent type – ten year comparison	
102

INVESTMENT MANAGEMENT SURVEY 2019-20 | INDEX OF CHARTS, FIGURES AND TABLES
7
FIGURES
Figure 1: Who are the IA’s members?	
9
Figure 2: The role of investment managers in channelling savings to investments	
15
Figure 3: Wider investment management industry	
19
Figure 4: Assets under management in European countries (December 2018)	
19
Figure 5: Assets managed for overseas clients	
20
Figure 6: A Three-Part Set of Policy and Regulatory Themes	
23
Figure 7: Fund Liquidity: A Complex Landscape	
34
Figure 8: Four measures of a global industry	
39
Figure 9: IA member holdings in UK asset classes	
52
Figure 10: Infrastructure investment by IA members	
53
Figure 11: Selection of UK infrastructure investment facilitated by IA members	
54
Figure 12: Overview of the UK’s pension landscape	
59
Figure 13: Direct and indirect employment in investment management in the UK	
96
TABLES
Table 1: Selected bond and equity market returns in 2019 (£ terms)	
17
Table 2: Global assets under management	
20
Table 3: Definitions based on IA Responsible Investment Framework	
38
Table 4: Proportion of IA Members investing by asset class	
46
Table 5: Distribution of staff by activity (direct employment)	
97
Table 6: Distribution of investment management jobs by region	
99
Table 7: Assets managed in the UK by IA members by firm size	
100

8
ABOUT THE SURVEY
THE INVESTMENT ASSOCIATION
THE SURVEY CAPTURES INVESTMENT 
MANAGEMENT UNDERTAKEN BY 
MEMBERS OF 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 2019.  
THE FINDINGS ARE BASED ON:
• Questionnaire responses from 72 IA member ﬁrms, 
who between them manage £8.5 trillion in the UK 
(84% 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 
specified.
• Publicly available information from external sources 
where relevant.
• Interviews and roundtable discussions with senior 
personnel from 15 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 AND 
ROUNDTABLES.
THE SURVEY IS IN SIX CHAPTERS:
1.  UK Investment Management Industry: 
A Global Centre
2.  Lessons From 2020 and Challenges Ahead
3.  Trends in Client Assets and Allocation
4.  UK Institutional Client Market
5.  UK Retail Funds Market
6.  Operational and Structural Issues
THERE ARE ALSO SEVEN APPENDICES:
1.  Summary of assets under management in the UK
2.  Summary of data from the UK institutional market
3.  IA sector classification scheme
4.  Notable M&A deals in the UK investment 
management sector (2009-July 2020)
5.  Definitions 
6.  Survey respondents
7.  Interview and roundtable participants
A NUMBER OF GENERAL POINTS SHOULD 
BE NOTED:
• Not all respondents were able to provide a response 
to all questions and therefore 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 
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.

9
£8.5TRN
MANAGED BY IA 
MEMBERS IN 
THE UK
IA 
MEMBERS 
HOLD OVER
ONE THIRD 
OF UK PLC
SECOND
LARGEST
INVESTMENT 
MANAGEMENT CENTRE 
AFTER THE US
£1.3
TRILLION 
MANAGED FOR 
UK FUNDS
MANAGE 
37%
OF ALL ASSETS 
MANAGED IN 
EUROPE
£1.9
TRILLION 
MANAGED FOR 
OVERSEAS FUNDS
£3.6
TRILLION 
MANAGED FOR 
OVERSEAS 
CLIENTS
INVESTMENT MANAGEMENT SURVEY 2019-20 | ABOUT THE SURVEY
FIGURE 1: WHO ARE THE IA’S MEMBERS?
1
Large investment management 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 overseas clients 
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.
2
Small and medium-sized investment 
management ﬁrms, primarily focused on UK 
and/or European clients, which undertake a 
diverse range of activities, of which investment 
management is a constituent part. 
3
Fund managers, whose business is 
based primarily on authorised 
investment funds
4
Specialist boutiques and private client 
managers with a smaller asset and client 
base and, typically, a specific investment or 
client focus.
5
Specialist pension scheme managers 
both 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.

10
THE INVESTMENT ASSOCIATION
SURVEY FOREWORD
THIS YEAR’S INVESTMENT 
MANAGEMENT SURVEY SHOWS 
A RESILIENT AND HIGHLY 
INTERNATIONAL INDUSTRY 
AS IA MEMBERS MANAGED A 
RECORD £8.5 TRILLION FOR 
UK AND OVESEAS CLIENTS AT 
THE END OF 2019. DESPITE 
THE UNPRECEDENTED EVENTS 
OF 2020, THE UK INDUSTRY 
HAS CONTINUED TO SERVE ITS 
CLIENTS WELL AMIDST THE 
CHALLENGE OF A CONTINUING 
GLOBAL PANDEMIC. 
At the time of writing, the UK is still attempting to 
return to a more normal way of life - children are 
going back to school, students are returning to their 
universities and workers are slowly coming back to 
offices. But things are certainly not where they were 
before the Covid-19 pandemic began. Locking down 
populations has stemmed the spread of infections 
but has had a severe impact on economic output 
globally, causing a record GDP contraction in the US 
of almost a third during the second quarter of 2020. In 
the UK, GDP contracted by a fifth over the same period, 
another record. To put this in context, during the Global 
Financial Crisis, GDP in the UK shrunk by no more than 
2.1% in a quarter.  
The pandemic has acted as a significant brake on 
globalisation in many sectors, although technology 
and communication services have been notable 
exceptions. The logistics of managing cross-border 
supply chains have become more complex as a result 
of efforts to contain the virus that now include sporadic 
implementation of localised lockdowns. The outlook 
for recovery and growth after Covid-19 is still highly 
uncertain. 
Our industry faced exceptional operational challenges 
when the UK went into lockdown in March and it rose to 
them. Investment management firms shifted extremely 
quickly to remote working, a change which may well 
have positive ramifications for the shape of the 
workforce for years to come. As more flexible ways of 
working become the norm, they have the potential for 
our industry to attract a much more diverse workforce 
than we have at the moment. Despite a growing 
industry focus on diversity, events in 2020 and the rise 
in support for the Black Lives Matter movement have 
reminded us how much further we need to go. The 
Diversity and Inclusion agenda is more important now 
than ever.
Looking ahead to the rest of this year and into 2021, we 
are also focused heavily on efforts to recapitalise the 
UK economy, helping companies to raise money and 
contributing to the over £14 billion already provided 
to FTSE companies through equity fund-raising since 
March. We will see further support in the months 
and years ahead through more direct investment in 
UK equities as well as corporate bonds, commercial

This year’s report shows an industry operating in an 
era of extensive challenge, but one which remains 
world-class and has shown itself able to adapt to the 
most difficult of circumstances. I hope you find the 
Survey interesting and informative and I welcome any 
thoughts on aspects of the industry you would like us 
to explore in future editions.
Chris Cummings 
CEO 
11
INVESTMENT MANAGEMENT SURVEY 2019-20 | SURVEY FOREWORD
property and infrastructure, one of the Government’s 
key manifesto priorities. We are particularly exploring 
how to help smaller, privately-owned companies which 
may not have been able to access capital markets in 
the past.
We will need to negotiate this challenge alongside our 
duty to deliver value for customers in what will be a 
very difficult economic environment. But increasingly, 
we will be investing and delivering value differently, 
as recognition of the importance of responsible and 
sustainable investment continues to accelerate 
through the Covid-19 crisis. It is particularly striking 
that fund inflows into responsible and sustainable 
funds in the first half of 2020 were four times higher 
than in 2019, albeit from a low base. Even as markets 
plunged and investors redeemed holdings in March of 
this year, those inflows remained positive.  
Amidst the onslaught of a global pandemic, the UK 
continues of course to prepare for the end of the 
Brexit transition period at the end of the year, with 
our industry most concerned about the longer-term 
outlook for the cross-border delegation that is at the 
heart of our worldwide operating model. Firms have 
been preparing for a range of scenarios, including a no 
deal Brexit, for a number of years. But the shortening 
negotiation timelines and increasing demands on 
government resources due to Covid-19 raise the stakes. 
The outcome of these negotiations could seriously 
threaten the UK’s position, reinforced in this year’s 
Survey, as Europe’s biggest financial centre, second 
only globally to the US.
IA MEMBERS 
MANAGED A RECORD   
£8.5TRN  
FOR UK AND INTERNATIONAL 
CLIENTS AT THE END 
OF 2019

EXECUTIVE SUMMARY
12
THE INVESTMENT ASSOCIATION
UK INVESTMENT MANAGEMENT INDUSTRY: 
A GLOBAL CENTRE
>>  Total UK managed assets under management by 
IA members increased 10% year on year to reach 
£8.5 trillion at the end of 2019. IA estimates suggest 
that at the end June 2020, despite the sharp falls in 
global markets throughout the year, industry AUM 
was approximately the same level recorded at the 
end of 2019. 
>>  This represents around 85% of the wider UK 
investment management industry, with total assets 
under management rising to an estimated £9.9 
trillion in 2019, up from a revised £9.0 trillion. 
>>  The UK remains one of the largest centres of 
investment management in the world. It is second 
only to the US and is the largest centre in Europe, 
where it is responsible for 37% of total assets under 
management
>>  Overseas clients account for 43% (£3.6 trillion) of 
total assets managed in the UK. Of this, European 
clients account for 58% (£2.1 trillion) of the total. 
2019 has seen notable increases in assets managed 
on behalf of clients in North America and Asia.
LESSONS FROM 2020 AND CHALLENGES 
AHEAD
>>  In a year of pandemic and the end of the Brexit 
transition period, we set out initial lessons learned 
and the challenges ahead. 
>>  From an operational perspective, the financial 
instability of March in particular has reinforced the 
importance of risk management processes within 
firms. Liquidity management, already a theme of 
significant focus for industry and regulators, has 
been under a particular spotlight. 
>>  Technology has played a pivotal role in the 
industry’s overall operational resilience, amid an 
unprecedented transition to working from home 
(WFH) as a result of global lockdowns. Continued 
investment in technology will be a critical 
component of firms’ success.  
>>  Diversity and inclusion (D&I) was already a high 
priority for the industry, but rising further in 
importance as firms point to the importance of a 
workforce that better reflect their customers and 
wider society. Gender diversity has been high on 
the agenda for a number of years but there will be 
increasing focus on ethnic diversity.
>>  Looking to broader challenges and opportunities, 
the industry is looking to ensure it can play a 
full role in the recapitalisation and economic 
recovery from Covid-19, while delivering value 
for its customers in a difficult investment and 
savings environment. In this context, and reflecting 
longer-term trends, responsible and sustainable 
investment emerges as the standout theme in 2020 
across customer markets.
>>  As we get closer to the end of the Brexit transition 
period, attention is keenly focused on the future 
of the UK as a European and international centre, 
with particular emphasis on the importance 
of delegation. Firms have identified strong city 
clusters and continued access to talent as key 
features of the UK investment management 
industry’s attractiveness, but have cautioned 
that some aspects of UK regulation may affect its 
attractiveness to international firms. 
TRENDS IN CLIENT ASSETS AND 
ALLOCATION
>>  Institutional clients remain the largest client group 
accounting for 79% of assets under management.  
Pension schemes (43% of total assets) continue to 
be the largest institutional client type.
>>  Strong capital market performance through 2019 
saw equities increase as a proportion of total 
assets from 36% to 38%, while bonds fell slightly to 
32% (from 33%). Although slowing, the stand-out 
trend over the last decade remains a shift beyond 
mainstream asset classes, reflecting a range of 
drivers, including greater allocations to alternatives 
and the strong growth of LDI strategies.
>>  Within equities, the UK allocation fell below 30% 
to 29% for the first time, down 18 percentage 
points from ten years ago. The allocation to 
overseas bonds in the fixed income space remained 
unchanged year on year at 50% of total fixed 
income allocation.

INVESTMENT MANAGEMENT SURVEY 2019-20 | EXECUTIVE SUMMARY
13
>>  Some 30% of total assets under management 
is now managed based on indexing strategies. 
This four percentage point increase on 2018 is an 
acceleration of the very steady growth in indexing 
over the last decade. 
>>  Despite reduced allocations to UK assets as a 
proportion of total assets, IA members remain 
significantly invested in the UK economy holding 
£1.6 trillion in UK equities, corporate bonds, 
commercial property and, increasingly in recent 
years, in infrastructure. Total infrastructure 
investments reached £45 billion, a £10 billion 
increase since the end of 2018. 
UK INSTITUTIONAL CLIENT MARKET
>>  IA members manage £4.0 trillion for UK institutional 
clients, primarily from the UK but also in offices 
around the globe, unchanged from 2018. 
>>  Third party assets account for about 85% (£3.4 
trillion) of the total, unchanged from 2018. Pension 
funds account for 72% of total third party assets.  
>>  Assets managed in liability-driven investment 
strategies reached an estimated £1.4 trillion in 
2019, up from £1.3 trillion in 2018. Multi-asset 
mandates account for just under a quarter (24%) of 
mandates in total asset terms once LDI mandates 
are excluded. 
>>  Within specialist third party mandates, fixed income 
accounts for 40% of all mandates, overtaking 
equities last year in total asset terms. 
UK RETAIL FUNDS MARKET
>>  By the end of 2019, UK investor funds under 
management (FUM) in UK and overseas domiciled 
funds had reached a record £1.31 trillion.  
>>  Initial reaction to market downturns in March 2020 
were strong with record outflows of £9.7 billion 
from UK retail funds. These outflows were largely 
dominated (76%) by outflows from fixed income 
funds. Global markets and sales both rallied 
strongly in Q2 2020. Total sales for Q2 reached 
£11.2 billion and FUM had recovered to £1.28 
trillion by June 2020 despite a 14% fall in March.
>>  Allocations to UK equity funds have declined 
substantially as a proportion of total UK investor 
FUM in the last 15 years falling from 39% of FUM 
in 2005 to 14% by June 2020. Between January 
2016 until June 2020 UK equity funds have seen 
heavy outflows of £12.7 billion, driven by economic 
uncertainty and weaker relative performance of the 
FTSE compared with other global indices. 
>>  The proportion of UK investor funds under 
management in indexing funds reached 18% in 
2019, up from 8% in 2012. Sales in 2019 were 
strong and remained resilient in March 2020, with 
positive net sales of £467 million against an outflow 
of £10.1 billion from active funds.
>>  FUM in responsible investment funds almost 
doubled between January 2019 to June 2020, 
reaching £33 billion in June 2020. Net retail sales 
were £7.0 billion in the 18 months up to June 2020 
with sales in the first half of 2020 four times higher 
than during the same period in 2019 . This includes 
March 2020 where net retail sales remained 
positive, albeit depressed, at £124 million. 
OPERATIONAL AND STRUCTURAL ISSUES
>>  Total average industry revenue stood at £22.9 billion 
in 2019. This equates to 28bps of total assets. 
Operating costs were £15.8 billion in 2019 (20bps).  
IA data points to a decline in operating profitability 
over the last five years.
>>  The UK investment management industry directly 
employed almost 40,000 people at the end of 2019, 
broadly unchanged on 2018. Around 113,000 jobs 
are supported by the UK investment management 
industry, either directly or indirectly.
>>  The UK investment management industry remains 
relatively unconcentrated. Assets managed by the 
top five and the top ten firms stood at 43% and 
58% of total assets respectively. Both were one 
percentage point higher than 2018.
>>  The proportion of assets managed by independent 
investment managers now stands at 42%, ten 
percentage points higher than the level recorded 
a decade ago. This is in large part a reflection of 
high levels of M&A activity seen in the industry over 
that period.

14
THE INVESTMENT ASSOCIATION
1 UK INVESTMENT MANAGEMENT 
INDUSTRY: A GLOBAL CENTRE 
SIZE OF THE UK INDUSTRY
>>  Global market performance in 2019 saw total UK 
managed assets under management rise to £8.5 
trillion, a 10% increase year on year. Despite the 
high market volatility in 2020, we estimate that as of 
the end of June strong market recoveries have seen 
assets return to the same levels recorded at the end 
of 2019. 
>>  Based on the pool of firms with UK headquarters, 
one fifth of assets are managed by firms 
headquartered in Scotland. If we look more 
broadly at total UK managed assets, 7% of total 
assets (£590 billion) are managed in Scotland. 
This is unchanged in relative terms from 2018 but 
represents a £60 billion increase in nominal terms. 
>>  The wider investment management industry 
(including hedge funds, private equity, commercial 
property and discretionary wealth managers) is 
estimated to manage £9.9 trillion from the UK, up 
from a revised £9.0 trillion in 2018.
UK INVESTMENT MANAGEMENT IN THE 
GLOBAL CONTEXT
>>  The UK is the second largest investment 
management centre in the world after the US, which 
has a significantly larger domestic market. With a 
European market share of 37%, it is larger than the 
next three European centres combined. 
>>  The investment management industry in the 
UK continues to serve a very global client base. 
There have been strong year on year increases in 
assets managed on behalf of clients from non-
EEA European clients, North America and Asia. 
Total overseas client assets have increased three 
percentage points year on year to 43% in 2019. 
>>  £1.9 trillion is managed in the UK for overseas 
funds (up from £1.8 trillion at the end of 2018). This 
represents 59% of UK managed funds, a figure 
which has remained fairly stable over the last 
three years. Three quarters of assets in overseas 
domiciled funds are managed for funds domiciled in 
Ireland and Luxembourg.
KEY FINDINGS
GLOBAL
MARKET PERFORMANCE 
IN 2019 SAW TOTAL UK 
MANAGED ASSETS UNDER 
MANAGEMENT RISE TO    
£8.5
TRN

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15
INVESTMENT MANAGEMENT SURVEY 2019-20 | UK INVESTMENT MANAGEMENT INDUSTRY: A GLOBAL CENTRE 
ROLE OF INVESTMENT MANAGEMENT  
The investment management industry has a central 
role in the economy channelling savings into 
investments and it is these two sides that define the 
industry’s purpose – see Figure 2.
The primary purpose of investment managers is to 
deliver good outcomes to their clients, whether these 
are individual savers or institutions such as pension 
schemes. This includes providing wider expertise in 
areas such as risk management, achieving economies 
of scale, 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 a basket of shares, bonds and other assets such 
as property, which can deliver returns over many years 
without exposing them to undue risk. 
The second side of the industry’s role reflects the 
actual investment, ensuring that capital markets work 
effectively for this investment to take place. In doing 
so, investment manager activity contributes to efficient 
markets which price information correctly and allow 
buyers and sellers to transact. This facilitates both 
primary issuance when companies 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 thus contribute to 
sustainable growth in the economy, benefiting both 
clients and wider society.
Investment managers are not unique in this as other 
financial institutions and individuals contribute 
to capital 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 for 
approximately six years.1 The industry therefore 
also has an important responsibility to undertake 
stewardship activity over the companies they invest 
in to protect the value for their clients. As we discuss 
in Chapter Two, this increasingly extends to broader 
issues such as environmental sustainability and 
executive remuneration.
1 The contribution of asset management to the UK economy, July 2016, Oxera
This Chapter looks at the growth of the UK as a pre-
eminent global investment management centre and 
considers the importance of the industry, both to the 
UK economy and to investors around the globe.
FIGURE 2: THE ROLE OF INVESTMENT MANAGERS IN 
CHANNELLING SAVINGS TO INVESTMENTS
INVESTMENT
MANAGERS
COMPANIES/
GOVERNMENTS/
INFRASTRUCTURE
RETAIL AND 
INSTITUTIONAL 
CUSTOMERS
INVESTMENT
IN ECONOMY
SAVINGS
PROVIDE NEW 
CAPITAL 
MARKET 
FINANCING
ACCESS TO 
EXPERTISE, 
SCALE AND 
ASSETS OUTSIDE 
REACH OF 
INDIVIDUALS
HOLD UK 
EQUITIES 
FOR AROUND 
6 YEARS
LINK 
INVESTORS 
AND 
COMPANIES

THE INVESTMENT ASSOCIATION
16
SIZE OF UK INDUSTRY  
At the end of 2019, IA members managed £8.5 trillion 
of client money in the UK, an increase of 10% on the 
previous year (see Chart 1). Despite the relative volatility 
in assets under management (AUM) over the last five 
years, total assets as of 2019 were broadly in line with 
the long term growth rate over the last ten years. 
Asset valuations remain a key driver of growth in 
industry AUM and are heavily affected by market 
movements. Between 2017 and 2018, total assets 
remained unchanged at £7.7 trillion due to the high level 
of volatility in global markets in the last quarter of 2018. 
Since then, equity markets in particular have rebounded 
strongly (See Review of global markets 2019 overleaf). 
The growth in industry assets is positive news against 
the backdrop of political instability and the UK’s 
departure from the European Union on 31 January 
2020. In the aftermath of the 2016 Brexit referendum, 
industry assets saw a significant 20% increase. This was 
largely a result of the depreciation in sterling versus all 
major currencies at the time and the high allocation to 
overseas assets. Currency depreciation was not a major 
driver in the 2019 growth in assets. 
Total assets in the UK funds market by UK investors2 
have increased 12% year on year to £1.3 trillion 
following a 5% fall at the end of 2018. Compound annual 
growth rates in the UK funds market have kept pace 
with total UK managed funds with both increasing 10% 
year on year over the last decade. We cover the UK fund 
market in more detail in Chapter Five.
The impact of the coronavirus pandemic on global 
markets was extreme with global markets recording the 
sharpest falls since the Global Financial Crisis in 2008. 
However, the impact was short lived and markets have 
rebounded so strongly that at mid-year IA estimates put 
total AUM back to the level recorded at the end of 2019 
despite the market volatility. By the end of Q2 2020, total 
assets in the UK funds market were close to, though 
slightly lower than, pre-coronavirus levels. However, the 
industry is facing a highly uncertain economic outlook 
as we continue to navigate through the fallout from the 
crisis. At time of writing data from the ONS show that 
in April and June 2020, the UK economy entered the 
deepest recession since records began.  
2 Total UK investor funds under management (FUM) comprises retail and institutional FUM for UK investors in UK domiciled and overseas domiciled 
funds. Prior to 2012, the data reported by the IA represented all investors in UK domiciled funds. 
3 IA analysis of EFAMA data.
CHART 1: TOTAL ASSETS UNDER MANAGEMENT IN THE UK 
AND IN UK FUNDS (2004-2019)
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
UK authorised and recognised funds            
Total assets under management in the UK
Total UK AUM/GDP % (RH)  
£bn 
450%
400%
350%
300%
250%
200%
150%
100%
50%
0%
%GDP 
Source: IA, ONS
By the end of 2019, the size of the industry relative to 
GDP had increased to over four times the size of the 
UK’s economy. This is characterised by the right hand 
side of Chart 1. By comparison, the latest data available 
for Europe excluding the UK indicated that outside of 
the UK the average size of an investment management 
industry in Europe is just over the size of local GDP. This 
means that investment management is considerably 
more important to the UK economy than it is to the 
economies of other European countries.3  
ONS data for Q2 2020 shows that UK GDP contracted 
20% over the second quarter of the year, the largest 
contraction on record by a substantial margin. If the 
IA estimate of broadly unchanged AUM as of June 
2020 is correct, then the industry has demonstrated 
remarkable resilience during a period of significant 
economic turmoil.

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INVESTMENT MANAGEMENT SURVEY 2019-20 | UK INVESTMENT MANAGEMENT INDUSTRY: A GLOBAL CENTRE 
 
After a difficult fourth quarter in 2018, a number 
of risks loomed over markets at the start of 2019 
including a global economic slowdown and a potential 
trade war between the US and China. 
Table 1 shows the annual total return of select indices. 
In spite of the economic and political uncertainty, 
overall global stock markets bounced back after the 
steep decline in Q4 2018: the annual total return of 
global stocks was 22% [1] in Sterling terms in 2019. 
Whilst annual performance across equity markets in 
2019 was far superior to 2018, the rally in the main 
equity markets was partly due to a recovery in Q1 from 
the slump experienced at the end of 2018 rather than 
a significant shift in the outlook for global economic 
growth. Markets were boosted globally in Q4 2019 
by the apparent easing of Sino-US trade tensions as 
President Trump looked set to sign a Phase One trade 
deal with China in early 2020. 
US equities led the way in 2019 and the S&P 500, 
the main US index, delivered returns of 26% despite 
ongoing trade tensions with China. The Federal 
Reserve cut interest rates three times to counteract 
the impact of slowing global growth and Trump’s 
impending trade war. This shift in approach from 
2018’s interest rate rises helped to bolster US market 
performance.
The UK stock market underperformed its US and 
European counterparts in 2019 but still ended the year 
up by 19%, compared with a return of –9.5% in 2018. 
Returns rallied in the last quarter of the year as the 
Conservative party won a significant parliamentary 
majority in the December general election. This victory 
helped to ease political uncertainty and quell concerns 
over a protracted Brexit timetable, benefitting smaller 
companies and the more domestically focused industry 
sectors in the FTSE. 
The US Federal Reserve was not the only central bank to 
lower rates during 2019 and central bank intervention, 
as in 2020, played an important role in propping up 
positive market performance. The European Central 
Bank cut rates further into negative territory to a low 
of –0.5% in September in order to stimulate economic 
growth in the Eurozone, which had been relatively weak. 
This monetary policy move helped European equity 
market returns to reach 20% over2019.  
In Japan inflation remained muted and corporate 
earnings declined in 2019, in a similar situation to 
Europe. Japanese equities returned 17% over the year, 
market performance in Japan was also influenced by 
the twists and turns of the US-China dispute. 
Non-gilts (primarily made up of corporate bonds) 
outperformed government bonds in the UK during 
2019.UK gilts returned 7% over the year but non-gilts 
fared slightly better, returning 9%. Generally corporate 
bonds offer higher yields than gilts (the yield is the 
coupon paid by the bond divided by the price of the 
bond, effectively the return that the investor makes) 
but government backed gilts are perceived as safer 
assets making them attractive to risk averse investors.
Global bonds performed strongly in the first eight 
months of 2019 but bond returns started declining 
sharply after September to finish the year up just 
2.7%. An environment of interest rate cuts from the 
Fed and the ECB translated to rising bond prices, 
which ultimately pushed bond yields lower. There is an 
inverse relationship between bond prices and bond 
yields: bond coupons or interest payments are fixed so 
if the bond price rises, the investor has to pay more for 
the same return.  
REVIEW OF GLOBAL MARKETS IN 2019   
TABLE 1: SELECTED BOND AND EQUITY MARKET 
RETURNS IN 2019 (£ TERMS) 
Global equity 	
22% 
UK equity	
19% 
Europe ex UK equity	
20% 
Emerging Market equity	
16% 
Japan equity	
17% 
US equity	
26% 
Global bonds	
3% 
UK Gilts	
7% 
UK Non-Gilts	
9% 
Source: Morningstar

THE INVESTMENT ASSOCIATION
18
SCOTLAND AS A MAJOR CENTRE
Although the City of London remains the leading centre 
of investment management activity in the UK, Scotland, 
and particularly Edinburgh, plays a key role nationally.
At the end of 2019 total assets managed in Scotland 
by IA members stood at 7%, equivalent to £590 
billion. This proportion is unchanged year on year but 
represents a £60 billion increase in nominal terms 
compared with 2018. 
Among UK-headquartered investment managers, 
one fifth (20%) of assets are managed by firms with 
headquarters in Scotland. Chart 2 shows how the 
regional split has evolved over the last 10 years. UK 
managed assets have become increasingly dominated 
by firms headquartered in London, a trend that has 
accelerated in 2019 due to M&A activity in Scotland.  
Many IA members headquartered in Scotland 
undertake investment management activity in other 
regions, primarily London, which is why there is an 
imbalance between Scottish managed assets and 
location of firm headquarters.
This is consistent with the data collected on staffing 
levels, which clearly shows that London is more likely 
to be a location for portfolio manager jobs than other 
areas of the UK (see p 99 – staffing table).
In our interviews with members this year some senior 
figures have suggested that we might see an increase 
in regional offices outside of the city clusters as a 
consequence of the operational changes caused by the 
pandemic. The shift to working from home through the 
crisis has called into question the need for and use of 
office spaces. It remains to be seen whether there will 
be long term consequences of the decentralisation of 
work spaces in 2020.  
CHART 2: UK-MANAGED ASSETS BY UK REGIONAL 
HEADQUARTERS (JUNE 2009-2019)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2009    2010     2011    2012    2013     2014    2015    2016    2017    2018    2019
London              Scotland             Other 
SCALE OF WIDER INDUSTRY
IA members represent the majority of the UK 
investment management industry in asset terms (85%). 
Firms not covered in detail in this report can be broadly 
split into the following categories:
• Hedge funds
• Private equity funds
• Commercial property management
• Discretionary private client management
• A small number of dedicated ETF operators
• Firms who are not members of the IA for reasons not 
noted above4 
Figure 3 provides estimates to show how these 
wider parts of the industry contribute to total assets 
under management in the UK. Many IA members 
are also active players in some of the more niche 
areas of investment management outlined in the list 
above. There is therefore some overlap in the figures 
presented in Figure 3 below. As of 2019 we estimate 
the size of the wider industry at £9.9 trillion up from a 
revised £9.0 trillion in 2018.  
4 This last group is more difficult to size as there is no consistent third party data available.

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19
INVESTMENT MANAGEMENT SURVEY 2019-20 | UK INVESTMENT MANAGEMENT INDUSTRY: A GLOBAL CENTRE 
FIGURE 4: ASSETS UNDER MANAGEMENT IN EUROPEAN  
COUNTRIES (DECEMBER 2018)
1 
2 
3
4
5
6
7
9
10
8
Country	                     Net  assets (€bn)           Market share
1.	  UK 	
8,609	
37%
2.	  France 	
4,072	
18%
3.	  Germany 	
2,190	
10%
4.	  Switzerland	
1,912	
8%
5.	  Italy 	
1,315	
6%
6.	  Netherlands 	
1,207	
5%
7.	  Denmark	
387	
2%
8.	  Spain	
369	
2%
9.	  Belgium 	
287	
1%
10.	 Austria	
131	
1%
	
 Other	
2,617	
11%
	
 TOTAL	
23,096	
Source: EFAMA5 
FIGURE 3: WIDER INVESTMENT MANAGEMENT INDUSTRY
IA
MEMBERSHIP
£8.5
TRN
PRIVATE
CLIENT
£610
BN
UK COMMERCIAL 
PROPERTY MANAGERS 
£525
BN
HEDGE 
FUNDS 
£350
BN
PRIVATE
EQUITY
£300
BN
TOTAL ASSETS
MANAGED IN THE
UK ESTIMATED AT
£9.9
TRN
ETF 
OPERATORS 
£330
BN
Source: ComPeer, Morningstar, Preqin, Investment Property forum, 
IA estimates
UK INVESTMENT MANAGEMENT IN 
EUROPEAN AND GLOBAL CONTEXT
The UK is the largest investment management centre 
in Europe with a market share of 37% in 2018. This 
proportion has remained fairly stable since 2011. 
Looking at the market shares of the other major 
investment management centres across Europe, the 
UK remains larger than then next three jurisdictions 
combined. 
5 Provisional data from Asset Management in Europe, 12th Annual Review, EFAMA, 2020

THE INVESTMENT ASSOCIATION
20
Figure 5 shows that the largest overseas client base 
in 2019 was still the EEA, for which the UK industry 
manages approximately £1.9 trillion. A further £190 
billion is managed for clients in other parts of Europe, 
predominantly Switzerland which accounts for over 
three quarters of this figure. Although starting from 
a substantially lower base, this represents a 44% 
increase on the 2018 figure. This takes the total 
European share of overseas assets to 58%, down one 
percentage point from 2018 given the higher relative 
increase of assets from clients in other regions.  
Outside of Europe, North American client assets are 
the next largest reaching over £700 billion, almost a 
quarter higher than in 2018. The other region which 
has seen notable growth in 2019 has been Asian client 
assets which increased £120 billion to £520 billion. 
Assets managed on behalf of clients in Latin America 
and Africa remained unchanged in 2019.  
FIGURE 5: ASSETS MANAGED FOR OVERSEAS CLIENTS
North
America
£700bn 
Latin 
America
£25bn 
Europe
£2.1trn 
Middle 
East
£230bn 
Asia
£520bn 
Africa
£30bn 
When we look more globally the UK is the second 
largest investment management centre behind the 
United States, which accounts for just under half of 
global assets under management and has higher total 
assets than all European nations combined (Table 2). 
The U.S. asset management industry serves a more 
domestic market. Outside of Europe and the U.S., 
Japan is a notable investment management centre 
with total assets of about £4.4 trillion. 
TABLE 2: GLOBAL ASSETS UNDER MANAGEMENT

	
Assets under	
Assets under
	
management	
management
	
(local currency)	
(£ equivalent)
US	
 $38 trillion6	
£31.9 trillion
Europe                                     €23 trillion5 		
 £27.3 trillion
Japan	
¥642 trillion7	
£4.4 trillion 
OVERSEAS CLIENT MARKET
From the perspective of total assets under 
management for overseas investors, the UK’s departure 
from the European Union on 31 January 2020 has 
not impacted its position as a preeminent centre of 
excellence for investment management. At the end of 
2019 assets managed in the UK on behalf of overseas 
clients increased by £550 billion to £3.6 trillion, 
equivalent to 43% of total assets. This proportion has 
fluctuated around 40% for a number of years, though 
the three percentage point increase year on year does 
represent a new high. It remains to be seen what the 
impact will be once we reach the end of the transition 
period at the end of 2020. 
6 Estimate based on North America Data. Global Asset Management 2020: Protect, Adapt and Innovate, BCG, 2020
7 Financial Services in Japan 2019/2020, NRI

21
1
INVESTMENT MANAGEMENT SURVEY 2019-20 | UK INVESTMENT MANAGEMENT INDUSTRY: A GLOBAL CENTRE 
SERVICES TO OVERSEAS FUNDS
As we saw from the European data in Figure 4, the UK is 
a dominant player in portfolio management but it is not 
as dominant as a fund domicile. IA members manage 
assets for funds domiciled across all continents from 
their UK offices. These overseas domiciled funds allow 
UK investment management expertise to be accessed 
from around the world. 
At the end of 2019, £1.9 trillion was managed in the 
UK for overseas funds representing 59% of total 
UK managed funds (see Chart 3). Three quarters of 
these assets were in funds domiciled in Ireland and 
Luxembourg. Although the proportion of assets in 
overseas domiciled funds has increased from 52% 
in 2015 it has remained broadly unchanged for the 
last three years. This is likely to reflect the fact that in 
their preparations for Brexit some firms transferred 
European client assets to overseas domiciled funds 
to ensure that these clients continue to be serviced 
regardless of the outcomes of negotiations. This shift 
was largely completed by the end of 2017, since then 
the split has remained relatively stable.
CHART 3: PROPORTION OF ASSETS MANAGED FOR UK 
AND OVERSEAS FUNDS (2015-2019)
UK                         Overseas                              
70%
60%
50%
40%
30%
20%
10%
0%
2015                     2016                      2017                     2018                      2019
IMPORTANCE TO UK SERVICE EXPORTS
Overseas client assets account for 43% of total UK-
managed investments, a 12% increase over the last 
decade. Given the size of its overseas client base, the 
investment management industry makes a significant 
contribution to the UK’s service exports through 
overseas earnings. The last 20 years have seen this 
contribution increase from £820 million in 1998 to 
£5.8 billion in 2018 (Chart 4). The right hand side of 
Chart 4 indicates that export earnings represented an 
average of 5% of total net exports over the past ten 
years though this figure has been quite volatile and has 
declined in the aftermath of the global financial crisis 
in 2008 from a high of 8.4% to a low of 4.2% in 2018.8 
CHART 4: EXPORT EARNINGS OF FUND MANAGERS AND 
CONTRIBUTION TO SERVICES EXPORTS (1997-2018) 
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Export receipts (inﬂation adjusted)             
Net fund manager exports as % total net services exports (RH) 
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
£bn 
Source: ONS
8 The data in Chart 4 captures earnings by independent asset managers but is likely to understate earnings from asset managers that are part 
of a wider financial services group such as an investment bank or insurer. As such, this estimate is conservative and the actual contribution of 
investment management overall to service exports is likely to be higher.

THE INVESTMENT ASSOCIATION
22
2 LESSONS FROM 2020 
AND CHALLENGES AHEAD
OPERATIONAL LESSONS FROM 2020
1. The fundamental importance of risk management
  >>  Firms’ increasing focus on risk management since 
the Global Financial Crisis (GFC) in 2008 has played 
an important role in helping them navigate the most 
recent crisis.
  >>  Liquidity management is particularly under the 
spotlight, with industry and regulators in the UK 
already considering the issue in the context of a 
number of concerns, including previous suspensions 
of commercial real estate (CRE) funds. 
2. Resilience and the necessity of investing further 
in technology
  >>  The coronavirus pandemic has meant that firms 
have needed to shift to a working from home (WFH) 
operating environment at unprecedented speed and 
scale. The transition has been relatively smooth and 
is a reflection of both a committed workforce and 
investment in technology.
  >>  Firms stressed the importance of continued 
investment in technology as it is likely that the 
workforce will be split between the office and 
working from home for the foreseeable future. 
3. The growing significance of the D&I agenda
  >>  Improved diversity and inclusion (D&I) are high 
priority themes for the industry, give further impetus 
by events during 2020. In addition to the operational 
benefits that D&I brings to company performance, 
it is increasingly important that the industry better 
reflects its customers and wider society. 
  >>  There has been increasing focus on gender diversity 
over the last few years but recent events in the US 
have brought more focus on ethnic diversity within 
the industry. 
  >>  A more holistic approach to diversity is needed 
with many firms beginning to look at the 
interconnectedness between different aspects of 
identity. 
WIDER CHALLENGES AND OPPORTUNITIES
1. Defining a clear role for industry in the economic 
recovery
  >>  As the UK continues to navigate through the social 
and economic impacts of the coronavirus, there is 
an expectation that the financial services industry 
needs to make a strong contribution to the UK’s 
economic recovery. This includes the investment 
management industry’s role in recapitalising listed 
UK companies.     
2. Delivering value for customers in a difficult economic 
environment
  >>  Regulatory changes in recent years have centred 
on delivery of customer value through greater price 
competition, alignment of interest and transparency. 
The debate on value is also now focusing on product 
development, including how to give investors access 
to investment opportunities in less liquid asset 
classes, particularly given the pressure on income.
3. Setting the agenda for responsible and sustainable 
investment
  >>  Covid-19 has focused the minds of investors on the 
importance of responsible investment with interest 
in social impact investments in particular increasing. 
IA data point to exceptionally strong inflows of new 
retail investment, while fund performance has also 
been extremely strong. 
  >>  The data collected in the Survey this year is based 
on the IA’s framework published in late 2019. 
We found that 38% of total AUM applied ESG 
integration and 19% applying exclusion policies.
4. Enhancing UK international standing in the context 
of Brexit
  >>  Firms have been preparing for a range of scenarios in 
the Brexit negotiation process for the last few years, 
however there remains concern around delegation 
rights. 
  >>  Looking ahead at how the UK can maintain its 
global competitive advantage over the long term 
firms identified city clusters and access to talent 
as key features of the UK investment management 
industry. However there is some concern that in the 
last few years certain regulation has made the UK 
increasingly unattractive for international firms.  
KEY FINDINGS

23
INVESTMENT MANAGEMENT SURVEY 2019-20 | LESSONS FROM 2020 AND CHALLENGES AHEAD 
2
In recent years, the industry has been going through 
a period of accelerating change, driven by a range of 
factors, notably:
- Policymaker and regulatory expectations
- The evolution both of customer needs and the wider  	
 economy
- Industry innovation and product development.  
As we set out in Figure 6 the operating environment is 
now also characterised by very significant uncertainty 
given the challenge through 2020 of a global 
pandemic. While most firms have made the necessary 
preparations, the impending end of the Brexit transition 
period also presents its own set of challenges.   
In our discussions and interviews with firms, we 
asked particularly about initial lessons learned from 
the pandemic and challenges ahead in the context of 
the wider changes already affecting the industry, its 
customers and the economy. What they told us falls 
into seven broad themes, three particularly focused 
on operational lessons, and four broader sets of 
challenges and opportunities:
Operational lessons
1. The fundamental importance of risk management
2. Resilience and the necessity of investing further in 
technology
3. The growing significance of the Diversity and 
Inclusion (D&I) agenda
Wider challenges and opportunities
1. Defining a clear role for industry in the economic 
recovery
2. Delivering value for customers in a difficult economic 
environment
3. Setting the agenda for responsible and sustainable 
investment
4. Enhancing UK international standing in the context 
of Brexit
FIGURE 6: A THREE-PART SET OF POLICY AND REGULATORY THEMES
How does the industry 
deliver for customers...
and for the wider economy 
and society...
in an unprecedented 
operating environment?
• Alignment of interest
• Transparency
• Governance and Oversight
• Education and communication
• Broader delivery culture
• Sustainable investment
• Widening Sources of Long-Term 
Funding
• Effective Capital Markets
• Resilience and Financial 
Stability
• Covid-19 disruption to economy 
and society
• End of Brexit transition
• Rising threat to globalisation
• Accelerating technological 
change
• Diversity and culture 
increasingly in focus

THE INVESTMENT ASSOCIATION
24
1: THE FUNDAMENTAL IMPORTANCE OF 
RISK MANAGEMENT
While the Global Financial Crisis (GFC) of 2008 was 
heavily linked to activities in the banking sector, it 
highlighted the importance of risk management across 
financial services. In the decade that has followed, this 
theme has since become even more firmly embedded 
in firms’ governance processes, not least in response to 
market and broader economic conditions that continue 
to be characterised by ongoing record low interest rates 
and unconventional monetary policy.
IA members have stated that this increased focus 
on risk management has played an important role in 
helping them navigate the most recent crisis. From 
investment in risk management technology to war-
gaming exercises to map out the impact of tail risk 
events, all contribute to firms’ preparedness and 
resilience through crises. 
“The lesson is that the next crisis never 
looks like the last one. The fallout from this 
is very different – it’s more like a natural 
disaster in many respects. It’s a reminder 
that the funds we manage for clients have 
to be prepared for all eventualities. It has 
reinforced our view that risk management 
and having really robust analysis and 
technology is a necessity not a luxury. 
We have the ability to pull apart our 
portfolios because of our risk management 
technology and to truly understand 
everything about them.” 
“The biggest lesson is around 
consideration of severe tail risk events. We 
had done an executive roundtable exercise 
on cyber-crime scenarios a few months 
before the lockdown which was helpful. The 
time you spend on resilience of extreme 
events and mapping those through is the 
biggest lesson for our business. We are 
fortunate in being a globally distributed 
business and we were able to learn lessons 
from China which allowed us to develop 
those scenarios very quickly. That ability to 
share learning and adapt accordingly has 
been fantastic.” 
One particularly significant element here is liquidity 
management, which was already high on the industry 
and regulatory agenda in 2019. A combination of 
concerns, including the experience of commercial real 
estate (CRE) funds following the Brexit referendum 
result in June 2016, led the Bank of England Financial 
Policy Committee (FPC) to initiate a workstream with 
the FCA to look at how to address potential liquidity 
mismatch within investment funds. The duration of 
this work has now been extended to take into account 
market experiences in March 2020 during the early 
stages of the coronavirus pandemic. For its part, 
the industry is also doing extensive work on liquidity 
management frameworks, including measurement and 
disclosure. Some of the wider implications for access 
to illiquid asset classes are covered in later sections of 
this chapter (see p.33-34).

25
INVESTMENT MANAGEMENT SURVEY 2019-20 | LESSONS FROM 2020 AND CHALLENGES AHEAD 
2
A broader aspect of risk management is the perceived 
importance among many larger firms of a diversified 
business model. For some, that message has been 
reinforced by the experience during Covid-19, but 
it is not a new theme, nor is it clear yet whether 
the consequences of Covid-19 will further drive 
consolidation in an industry that has long been 
characterised by comparatively low barriers to entry 
and successful specialist firms.  
“Our business has stood up extremely well. 
There is a lesson around diversification, you 
don’t want all of your eggs in one basket in 
terms of both client type and investment 
strategy. Our business is very robust 
because it is diversified.” 
As we set out in Figure 6 the operating environment is 
now also characterised by very significant uncertainty 
given the challenge through 2020 of a global 
pandemic. While most firms have made the necessary 
preparations, the impending end of the Brexit transition 
period also presents its own set of challenges.
“One challenge is continued fee pressure 
and a focus on value for money, particularly 
in a low interest rate environment. The 
increased regulatory burden combined with 
continued fee pressure will trigger further 
consolidation in our industry. Scale matters 
more than ever both in terms of trying to 
capture efficiencies and price accordingly 
but also because you need resources 
to be able to respond to the demand for 
sustainability and operating in complex 
markets.”
2: RESILIENCE AND THE NECESSITY OF 
INVESTING FURTHER IN TECHNOLOGY
After a period in which senior industry figures have 
been significantly emphasising the importance of 
investment in technology, it is clear that Covid-19 
has seen some of that investment substantially pay 
off. While not complacent, the general view within 
the investment management industry is that the 
unprecedented speed and scale of the shift to remote 
working during the pandemic has resulted in a highly 
effective operating environment. This is seen as a 
reflection of a combination of a strong and committed 
workforce and the quality of the technological 
infrastructure.
“I’m enormously proud of the people I 
work with. Everyone has demonstrated 
such strength and resilience, continuing 
to serve clients in a first-class way, whilst 
adapting to new and often challenging 
circumstances on the home front. The 
quality of our people has manifestly been a 
contributing factor to our success.” 
“Technology has been instrumental in 
enabling us to work remotely, keeping 
the error count low and driving incredible 
efficiencies across our operating 
platforms.”

THE INVESTMENT ASSOCIATION
26
At the same time, firms are in different places along 
the spectrum of technological change, and this is 
increasingly seen as a source of competitive advantage 
or, conversely, disadvantage. 
“Technology will be the single biggest 
differentiator between companies that 
understand it and do well and those 
that don’t. There have been significant 
advances in use of technology for risk 
management in terms of data aggregation 
and concentration risks- things that have 
occurred through Covid-19. Fund managers, 
risk managers, operations and marketing 
teams who harness technology can do a 
better job as it enables better insights. In 
an industry that is continually compressing 
fees, tech is your only answer in remaining 
relevant and able to compete.” 
Firms stressed the importance of continued 
investment in technology and the crisis is also 
accelerating industry thinking about future approaches 
to client communication and distribution: for 
example, the importance of shifting away from paper-
based disclosures towards more innovative digital 
disclosure which should lead to greater innovation and 
customisation in the space. 
“We have been investing in technology for 
15 years and it’s times like this you realise 
the wisdom of that investment. It allows 
you to continue to serve clients seamlessly. 
Our performance has held up extremely 
well. We’ve been able to work almost 
completely remotely and operational errors 
have been mostly very low.” 
In terms of the wider implications of remote working, 
a debate has already started on the future world of 
work. This is likely to take some time to work through. 
There are clearly significant advantages of more 
remote working, with some employees benefiting 
from greater time flexibility and reporting increased 
productivity. Certain activities, including sales, may 
even be accelerated with the ability of using video 
presentations to achieve greater reach and scale. IA 
members are looking at how the working from home 
(WFH) period could be leveraged to accommodate a 
more balanced lifestyle for their employees.
At the same time, some firms made a number of 
observations about the limitations of remote working, 
notably challenges for team-based work and the 
dependence on strong local communication and data 
infrastructure, which is not universally the case in the 
UK. During the pandemic there has been a growing 
focus on mental health as employees adjusted to 
isolated living and working conditions. IA members 
have introduced employee assistance programmes 
(EAPs) with many organising mental health awareness 
staff groups.
“Because everyone is working from home 
the real challenge as corporates is we don’t 
own the last mile. A lot of this hinges on 
peoples’ individual broadband connections. 
For this to continue, this will need to be 
very consistent across the UK and other 
parts of the world. If it’s not consistent that 
is potentially creating risk for your business 
but it is not a risk we can control.”

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INVESTMENT MANAGEMENT SURVEY 2019-20 | LESSONS FROM 2020 AND CHALLENGES AHEAD
2
It is likely that for the foreseeable future the workforce 
will be split between the office and working from home. 
This has an impact on culture in particular as more 
people move back to working in the office there is a 
risk that those who continue to work from home could 
feel less included. This brings challenges for leaders 
who will need to manage effectively across both 
populations. 
“There are lots of people returning to 
work. There are certain things you can 
do very well from home, but team based 
work is hard. It’s hard to brainstorm 
virtually. Practically, if some form of social 
distancing has to be applied for longer, it 
may mean more office space rather than 
less because we can only fit in a quarter of 
staff based on current rules.” 
3: THE GROWING SIGNIFICANCE OF THE 
D&I AGENDA
The issues around diversity and inclusion (D&I), 
and lack thereof, have tended to come to the fore 
during recent crises, albeit for different reasons. 
Since the GFC, a growing body of academic research 
has highlighted the role that groupthink played 
in destabilising the financial system. D&I is a key 
indicator of culture and diverse workforces allow firms 
to have access to a broader range of views that can 
open up necessary challenges and discussions to 
ensure better outcomes. 
“The science is irrefutable on this point 
– there is sound academic research 
explaining why you make better decisions 
with a diverse workforce with different 
points of view. To have a good culture, you 
need a diverse workforce. ” 
However, this operational set of considerations is 
overshadowed by the growing imperative to ensure 
that the investment management industry is better 
reflective of the customers and wider societies it 
serves. This development is seen at multiple levels, 
focusing initially on gender diversity but increasingly on 
ethnic diversity. 
“Diversity has been a key topic for this 
industry for a long time because if you want 
to be relevant in today’s society you need to 
reflect the customers that you’re acting on 
behalf of as a fiduciary. The industry needs 
to do a better job.”

THE INVESTMENT ASSOCIATION
28
GENDER DIVERSITY
Gender diversity has taken centre stage in recent years 
with a number of initiatives in place to tackle the issue 
within the industry. The mandating of Gender Pay Gap 
(GPG) reporting has meant that firms with over 250 
employees have very publicly had to declare their GPG 
positions and as such have been forced to focus on the 
drivers of the high gender pay gap. By and large, many 
firms highlighted the underrepresentation of women in 
senior risk taking roles as the primary driver. 
Although the gender pay gap reporting deadline for 
2020 was suspended due to the coronavirus pandemic, 
gender equality and closing the gender pay gap 
remains high on the investment management industry’s 
priorities. In May 2020 the IA launched the ‘Addressing 
the Gender Pay Gap: Industry Initiatives’ report, which 
looks across the IA membership and showcases 
innovative initiatives focused on recruitment and 
attraction as well as retention and advancement.
Many firms have come a long way on gender balance 
in graduate recruitment which will take some time to 
work its way up the pipeline into senior management 
roles. 
“We make sure that the list that executive 
search firms come up with are more diverse 
and interview panels are more diverse. 
The more diversity you create in hiring 
processes the more likely you change who 
you hire. From a gender perspective, we 
have hired 50/50 in the last 12 months but 
a lot of that came from how we’re sourcing 
and who we’re putting on the interview 
panel.” 
“What we’ve done with women is fixing the 
bottom level intake but that takes years 
to flow through into senior leadership 
positions. We set up a returners programme 
for the mid-level roles with good talented 
women who have taken career breaks.” 
A diverse workforce is not enough. Firm are also 
conscious of the need to foster inclusive environments 
to empower diverse groups, who in many cases are 
in the minority, to challenge the majority view. This 
is where culture can play a crucial role. The view of 
those that we spoke to was that the Covid-19 move 
to flexible working, particularly working from home 
(WFH), may help mitigate some of the retention issues 
among women and also help in attracting a wider 
pool of candidates. At the same time, there is also 
an awareness in the industry that WFH carries the 
possibility that women will be disproportionately 
affected by caring and family responsibilities, with a 
potentially detrimental not positive impact on work.
“The one wonderful thing that WFH does 
is level the playing field from an inclusion 
perspective because it is forcing us to be 
more flexible with time. There has always 
been a stigma around flexible working and 
WFH. That whole debate is going away. The 
opportunities for offering people flexible 
working arrangements are greater and 
will help us tap into a more diverse pool 
of people who would not otherwise have 
applied.”

29
INVESTMENT MANAGEMENT SURVEY 2019-20 | LESSONS FROM 2020 AND CHALLENGES AHEAD
2
ETHNIC DIVERSITY
In the midst of the coronavirus pandemic, the world 
witnessed the tragic death of George Floyd and the 
subsequent political movement in defence of black 
lives garnered support across the world. The events 
provoked conversations around race with a number of 
firms publicly acknowledging that as an industry we 
have a real issue with black representation. The IA’s 
‘Closing the Gap’ report highlighted the importance 
of measuring and monitoring key metrics in order 
to assess progress. One of the issues around black 
representation is that historically the industry has 
looked at data on Black, Asian and Minority Ethnic 
(BAME) as a collective, which has masked the 
underrepresentation amongst the black community.  
This focus is starting to change. The IA published in 
2019 a seminal report, Black Voices, on the issue and 
firms also stress the need to do more, particularly 
starting with good data to clearly target the problem.
“We’ve looked at data comparing the 
investment management industry to 
the population across various areas of 
diversity. We’re not underrepresented in 
LGBT and Asian staff but we have a big 
problem with women in senior risk taking 
roles and black talent. The BLM movement 
has focused our minds and highlighted that 
we haven’t put the same energy into that 
problem. We’ve dealt with diversity very 
broadly but we haven’t really challenged 
ourselves on black representation.” 
“Data is the challenging one - particularly 
with ethnicity. One of the challenges 
across the industry is the notion of self-
identification. It has been much harder to 
move that issue forward because we don’t 
have very clear data. If you have a dataset 
that is saying you’re not doing a very good 
job, that will incentivise action.” 
Many firms are also now approaching diversity within 
their organisations more holistically and some are 
beginning to look at the significance of intersectionality 
(i.e. the extent to which aspects of a person’s identity, 
such as gender, race, sexuality, class, might combine to 
create unique modes of discrimination and privilege) 
and are taking steps to create an inclusive working 
environment that will address diversity across the board.  
“We are trying to get our heads around 
how you create an all-encompassing 
view of D&I. We need to focus on the end 
objectives and outcomes as opposed to 
initiatives focused on singular issues. That 
is the only way you can objectively monitor 
and measure and hence achieve the right 
outcomes.” 
“It’s about trying to get a holistic picture 
of diversity. Investment managers do 
fundamental bottom up research, we 
should be able to throw the proper 
intellectual analysis at this in a 
disciplined way.”

THE INVESTMENT ASSOCIATION
30
WIDER CHALLENGES AND OPPORTUNITIES
Alongside these lessons from the direct experience 
of operating through the Covid-19 pandemic to date, 
firms also identify four key challenges looking ahead to 
2021-2022
1: DEFINING A CLEAR ROLE FOR 
INDUSTRY IN THE ECONOMIC RECOVERY 
As the UK economy starts to take the first steps to 
recovery after the violent contraction of the first half 
of 2020, different parts of the financial services sector 
are examining how best they can provide support. 
Senior figures we interviewed are acutely aware of the 
expectations of financial services, including investment 
managers, and recognise the need to play a pro-active 
and visible part in the recapitalisation process and the 
path back to recovery.
“This is an opportunity for the industry 
broadly to reinforce its purpose. Whether 
it’s serving pensioners and savers with 
income at a time when income is scarce or 
providing long term capital for companies 
in this country and abroad. Demonstrating 
the value of having a large and successful 
investment management industry that 
invests for the long term and helps people 
meet their savings and retirement goals is 
an extraordinary opportunity.” 
“We must make sure we give back in this 
environment. It’s really important that we 
don’t just hunker down and we are aware 
and stay connected with our stakeholder 
base. We’re very fortunate, we can WFH. 
We don’t have place based work, we’re not 
teachers in schools and we’re not pilots. 
We own restaurants, we don’t run them. We 
should consider ourselves very fortunate.” 
For the investment management industry, the most visible 
source of that support is through the recapitalisation 
of listed UK companies. At the time of publication, UK 
companies had raised over £14 billion, primarily in private 
placements, since early March. This process is expected 
to continue, and likely accelerate through the rest of 
2020 into 2021. Investment managers, alongside other 
institutional and retail investors, play a critical part, and 
also exercise significant corporate governance oversight.
“Our industry is a source of long term 
capital. There is a whole range of economic 
activity that can be funded by the judicious 
and intelligent use of very large pools of 
capital, ranging from SMEs to large, dividend-
paying FTSE100 companies. When put to 
good use, that should benefit the economy 
and provide jobs and investment. That is 
the most important thing we can do as an 
industry.”

31
INVESTMENT MANAGEMENT SURVEY 2019-20 | LESSONS FROM 2020 AND CHALLENGES AHEAD
2
At the same time, the investment management industry 
is constrained ultimately by the fact that it is primarily 
investing the money of its customers, to whom it owes a 
fiduciary responsibility. Managers are acutely conscious 
of the need to balance that responsibility with the wider 
role they are expected to play in supporting investment 
and long-term economic growth.
“We will have to demonstrate that we are 
playing an active part in the UK economic 
recovery while being fiduciaries to our 
clients. I don’t think those two things are 
contradictory and in fact they support 
each other. There are going to be terrific 
investment opportunities for clients that 
also support the recovery.” 
“Investment managers have to balance 
delivering outcomes and fiduciary 
responsibilities to investors with supporting 
growth in companies in the economy. 
The tension between those two things in 
the next few years is going to be many 
multiples of what it has been in the last few 
years because of the enormous amount of 
recapitalisation, the enormous demand for 
income in a zero interest rate environment 
and the demand for solving pensions gaps 
all over the world in a time when retail 
customers cash flows are likely to be 
constrained. The question in all those things 
is why do we need the industry? It’s to do all 
those things and to deliver those outcomes. 
This kind of environment shows how hard 
that is to do and the criticality of getting 
that right as an industry going forward.” 
UK COMPANIES 
HAVE RAISED OVER
£14BN  
SINCE MARCH 2020

THE INVESTMENT ASSOCIATION
32
INCOME AND THE ROLE OF THE DIVIDEND
In the context of weak economic growth, the challenge 
of whether to maintain or cut dividends has been 
a particularly significant and sensitive issue for 
companies and investors. As countries began declaring 
national lockdowns, companies were facing huge hits 
to their revenue streams. At time of writing 390 UK 
companies have taken the decision to cancel, defer or 
reduce dividend payments in the short term (approx. 
£32 billion in value) in order to retain cash needed 
to protect their businesses for the long term. Payout 
forecasts for FTSE 100 companies have been adjusted 
down from £91 billion at the start of the year to £62 
billion by the end of Q2 as a result.9
The decision regarding dividend payments is a delicate 
one. As well as a significant component of total return, 
dividends are an important source of income for both 
retail savers and institutional investors, including 
pension funds and charities. The IA letter to FTSE 350 
chairs expressed the industry’s view that companies 
should take a prudent approach to current and future 
dividend payments, understanding the company’s 
ability to withstand financial stress and ensuring 
that employees and suppliers can be paid, while not 
unnecessarily reducing or rebasing the dividend level.
For those reliant on dividend income to meet their 
liabilities it is likely they will need alternative sources 
of income as interest rates are likely to remain 
suppressed and bond yields remain low. However, 
opportunities are limited, which raises significant 
questions about the extent to which investors are 
prepared to take additional risk in areas such as credit, 
particularly in an environment where central bank 
interventions may be having a significant impact on 
current valuations. After over a decade of record low 
interest rates, the ‘hunt for yield’ has already been a 
central driver in the growth of private markets, as we 
explore further in Chapter 3. 
“Certainly, there is a need for income and 
not that many ways to get it. You’ve got 
equity dividends, property rental and credit. 
Property and equities both have problems 
and credit will have problems once we open 
up and companies are standing on their 
own two feet and trying to generate cash 
flow. I don’t think there is a safe place at 
the minute.” 
“There are companies being supported 
because they had viable businesses pre-
coronavirus that may not have viable 
businesses after coronavirus, but their 
credit isn’t reflecting that because it is 
being bought by official channel buyers. 
The credit markets could therefore be quite 
dangerous unless you’ve got good credit 
analysis. Investors will need to be very 
careful not to buy indiscriminately.” 
9 Dividend Dashboard Q2 2020, AJ Bell

33
INVESTMENT MANAGEMENT SURVEY 2019-20 | LESSONS FROM 2020 AND CHALLENGES AHEAD
2
2: DELIVERING VALUE FOR CUSTOMERS IN 
A DIFFICULT ECONOMIC ENVIRONMENT 
The focus on good customer outcomes, whether in the 
retail or institutional markets, has never been greater, 
whether from an industry or regulatory perspective. 
The Covid-19 crisis and the economic challenges it 
brings comes amidst an unprecedented set of changes 
affecting industry delivery for UK customers. 
Across the UK retail fund market, 2019-2020 has seen 
the final implementation of a range of measures put 
in place as part of the FCA Asset Management Market 
Study, whose final report was published in June 2017. 
Other components of the market, notably platforms, 
are subject to ongoing implementation measures 
arising from the Final Report of the FCA Platform 
Market Study. In the institutional market, remedies 
proposed by the CMA as part of the Investment 
Consultants Market Investigation Final Report in 
December 2018 are also being implemented.
A number of common themes emerged as part of these 
competition studies, particularly around alignment of 
interest and transparency. Significant changes for the 
industry included:
• Requirement for minimum levels of independent 
governance representation on authorised fund 
manager (AFM) boards.
• Value assessment reports, published annually, which 
set out the AFM’s assessment of how funds have 
delivered for customers according to a number of 
specific criteria. The first generation of those reports 
has been appearing through the first half of 2020.
• Clearer communication in areas such as fund 
objectives, use of benchmarks and performance 
reporting
• A new institutional market cost reporting framework, 
being operated on a pan-stakeholder basis through 
the Cost Transparency Initiative (CTI)
A combination of these changes, combined with wider 
commercial trends already apparent in the UK and 
elsewhere, are driving an increasing focus on fees and 
wider value, which in turn is also driving consolidation. 
However, the debate on customer value is also turning 
increasingly to product development and how to 
ensure that in such a challenging economic and 
market environment, customers are able to access an 
appropriate product set, particularly in areas under 
pressure such as income. Here, one increasing theme 
is the role of illiquid investments, particularly as 
private markets continue to become more important 
(see also p.46)
LIQUIDITY AND WIDENING SOURCES 
OF RETURN 
UK institutional investors have been investing in 
illiquids for many decades. For DB pension schemes, 
property historically played a significant role in 
portfolios through the 1970s and 1980s. In the last 
twenty years, alternative allocations have been more 
diversified, with much broader exposure including 
private equity, private debt and infrastructure. For 
DC pension schemes and retail investors, it has been 
less straightforward to access such markets, partly 
because of a lack of available fund structures, partly 
also because of other constraints related to a platform 
delivery infrastructure mainly built on an expectation of 
daily dealing and daily redemption.
Those we spoke to as part of the interview process 
emphasised the need for a broader range of fund 
vehicles for the DC and retail market to take full 
advantage of the investment opportunities available. 
A flagship industry proposal in this area is the LTAF 
(see p.34), designed to move away from the 
conventional model of daily redemptions in order to 
facilitate greater access to illiquid investments.
“We’re in a low yield environment and 
dividends are going away. Solutions that 
provide income that might have less 
liquidity, such as infrastructure, might 
be coming more into the mainstream. 
Institutional investors have been buying 
infrastructure for a long time but my hope 
is that we come up with a solution that 
allows retail investors to do that because 
you’re not getting income elsewhere. While 
public market equities continue to shrink, 
alternatives, including private credit and 
private equity, continue to grow for both 
institutional and retail investors.”

THE INVESTMENT ASSOCIATION
34
“If retail consumers prioritise immediate 
consumption and stretch cash flows we 
will have an even more sizeable pensions 
gap. How do you get returns within those 
pensions? You have to invest in long term, 
illiquid assets.” 
“The whole debate is particularly acute in 
SME investing. We need a fund structure 
that is long term in nature, that digests that 
liquidity and doesn’t offer you daily liquidity 
and you make sure clients understand what 
they are buying. There is a solution out there.” 
TIME FOR A NEW FUND VEHICLE TO ACCESS 
ILLIQUIDS?
Events within the funds industry through 2019 also 
shone a light on some of these themes, as the high-
profile suspension in June of the LF Woodford Equity 
Income (WEI) Fund gave rise both to questions about 
fund industry governance and the issue of access to 
private markets. An FCA investigation is still underway 
into the exact circumstances that led to what would 
eventually see the winding up of LF WEI.
Looking to the structural issues raised by the debate 
over illiquids and the role of investment funds (see 
Figure 7), the IA has proposed a new Long-Term Asset 
Fund (LTAF) which would move away from daily dealing 
and have wider investment powers than a NURS or 
UCITS. The LTAF could facilitate new routes for capital 
to support the economy, while providing investors with 
a significant source of diversification. In addition to 
this customer benefit, the LTAF could also help address 
some of the concerns expressed by central banks 
and regulators internationally about the potential for 
liquidity mismatch in investment funds.
There is also strong recognition in the industry of the 
need to ensure that customers, particularly individual 
savers, understand the characteristics of illiquid 
assets. This will mean that great care will be needed 
regarding the terms of access. 
FIGURE 7: FUND LIQUIDITY: A COMPLEX LANDSCAPE
Customers seeking yield and diversification. Distribution architecture built on daily liquidity
Significant industry work on 
new Long-Term Asset Fund 
(LTAF)
2019-20 FCA/BoE 
workstream on liquidity 
mismatch and funds
Rapidly growing funds industry. Rising interest in private markets and increasing expectation of market-based 
finance to support public infrastructure internationally
LIQUIDITY
MANAGEMENT
FINANCIAL 
STABILITY
Policy focus on customer 
protection, esp. post-
Woodford 2019
Concern about further 
property fund suspensions
Post-GFC global reg. 
agenda, strengthened in 
UK by Woodford and Covid 
experience
WIDENING 
ACCESS TO 
ILLIQUIDS

35
INVESTMENT MANAGEMENT SURVEY 2019-20 | LESSONS FROM 2020 AND CHALLENGES AHEAD
2
3: SETTING THE AGENDA FOR 
RESPONSIBLE AND SUSTAINABLE 
INVESTMENT
In light of the pandemic, some market commentators 
expected responsible investment (RI) and sustainability 
commitments to take a backseat, as savers and 
investors as well as Government and other institutions 
grappled with the immediate implications of the 
economic dislocation. This expectation is not borne 
out either in initial data on customer behaviour, or in 
what investment management firms are highlighting as 
critical priorities through the crisis. As Chapter 5 shows 
in more detail, sales to RI funds through the crisis have 
accelerated, albeit still from comparatively low levels.
Looking across the E, S and G of Environmental, Social 
and Governance (ESG) criteria that sit at the heart 
of responsible investment processes, a number of 
observations were made in senior industry interviews 
this year:
• Environment: The pandemic has illustrated different 
levels of inter-connection, both across the globe 
between multiple nations, and between the human 
and natural world. This appears to be reinforcing 
the broader concern for the environment that saw 
millions around the world taking to the streets in 
2019 to join the ‘Global Climate Strike’. The UK will 
be hosting the next UN Climate Change Conference 
(COP26) in November 2021 after it was postponed 
due to the pandemic. The conference is intended to 
accelerate international efforts to reach the goals of 
the Paris Agreement. In a speech to COP26 Business 
Leaders in June, Business Secretary, Alok Sharma, 
addressed investment managers directly seeking 
a commitment to “build a greener more resilient 
financial system” through initiatives such as the 
Coalition for Climate Resilient Investment and the 
Task Force on Climate-related Financial Disclosures. 
“There are initiatives to get the FTSE 100 
to sign up to a number of commitments 
on carbon net zero. As an industry we 
are going to be under the spotlight. There 
is going to be real focus on us and the 
responsibility we have managing assets on 
behalf of individuals and pension funds to 
hold these companies to account on these 
commitments.” 
“The world has come together fairly 
quickly to combat the coronavirus, the 
question is can we come together to tackle 
climate change more aggressively and 
can we work together with companies 
as an industry to do so. Governments 
will need to start incentivising certain 
companies to change their behaviour. We 
will see continued demand for sustainable 
investing quite strongly.”

THE INVESTMENT ASSOCIATION
36
• Social: The economic consequences from global 
lockdowns are going to be felt for some time. 
With government deficits at record highs, there 
is a growing level of expectation around the role 
that investment managers can play in helping the 
UK’s economic recovery. Historically, the ‘social’ 
component of the ESG prism has been notably 
smaller compared to engagement with companies 
around good governance. However, the pandemic and 
latterly public discourse on racial and wider income 
inequality has shone a spotlight on social matters, 
reinforcing the importance of these considerations 
and galvanizing efforts for investment managers 
to focus on social as well as environmental and 
governance considerations.
    Social impact investing, where investment managers 
aim to generate specific and often measurable social 
benefits as well as financial returns, is attracting 
growing interest. Most notably in the potential 
role of private finance in supporting positive social 
impact projects such as social housing. This is likely 
to remain a challenging area as both investment 
managers, and institutions such as pension schemes, 
seek to square off fiduciary responsibilities with 
wider responsibility in the area of social impact. 
However, there is growing appetite to explore this 
in practice and a number of IA member firms have 
noted an uptick in interest from clients around social 
impact investments.  
“There is a sense that the Covid-19 crisis 
has impacted everyone, we’ve all been 
stuck in our homes. But, on the other hand 
it hasn’t impacted people equally. The crisis 
has shown that society is not uniformly 
resilient. Companies being held to account 
on issues such as how they treat workers 
and BLM has brought ethnic diversity 
to the fore. The social side is going to be 
incredibly important. We will probably see 
fair society funds launched to tackle the 
“S” side.” 
“On the social side we can do more in the 
real asset area, building socially inclusive 
communities. Where we go in to build in city 
centre locations, we can make sure that 
we are building social housing into those 
communities. It might be easier to deal 
with the social side in the built environment 
rather than make a big deal of it in the 
stock market.” 
• Governance. There is an ever increasing spotlight 
on institutional investors and by proxy, investment 
managers to utilise their ‘stakeholder voice’ to ensure 
that companies move beyond traditional metrics 
associated with shareholder value maximisation. 
Issues under scrutiny include executive 
remuneration, diversity on boards and long term 
economic sustainability. Through the early stages 
of the coronavirus pandemic, investment managers 
acted to support companies in their corporate 
governance processes in a number of ways, including 
on financial reporting, dividend payments, virtual 
AGMs and executive remuneration.10 
10 https://www.theia.org/sites/default/files/2020-04/Letter%20to%20FTSE%20Chairs%20-%20April%202020_0.pdf

37
2
INVESTMENT MANAGEMENT SURVEY 2019-20 | LESSONS FROM 2020 AND CHALLENGES AHEAD
RESPONSIBLE INVESTMENT DELIVERY
Questions have been raised around whether responsible 
investment (RI) strategies can compete with non-
responsible investment strategies on delivery. Looking 
at performance, the economic impacts of Covid-19 have 
affected the non-RI offerings of firms we spoke to harder 
than their RI offerings. Part of this outperformance 
stems from the overweighting of sectors such as 
healthcare and technology that have fared well through 
the crisis and the underweighting of energy companies 
that were hit hard through the economic shutdown. A 
range of analysis has also pointed to the governance 
piece, and the importance of investing in well run 
companies with strong corporate cultures. 
“I can remember years ago there was this 
perceived trade-off that if you invested 
responsibly there was a cost of doing so, 
you would have to give something up. There 
is a growing body of evidence that not 
only are you not giving something up, but 
sustainable products are outperforming 
their non-sustainable peers.” 
“Our own proprietary engagement model 
covers the vast majority of companies we 
engage with and shows that those rated A 
and B have outperformed those with lower 
ratings.” 
“Our sustainable funds have outperformed 
regular equity funds. This is partly because 
of some of the sectors these are not 
invested in and partly because companies 
that are managed in a sustainable manner 
deliver better results. That will fuel the 
demand. There will be a push for profit with 
purpose and stakeholder capitalism.” 
SIZING THE MARKET FOR RESPONSIBLE 
INVESTMENT
Over the last few years, our data collection exercise 
has reflected the evolving conversation around what it 
means to invest responsibly. In the last few iterations of 
this Survey we have therefore been unable to compare 
the data one year to the next. Last year’s data was 
collected based on the Global Sustainable Investment 
Alliance (GSIA) definitions. On the back of an extensive 
consultation to develop industry-agreed definitions, 
the IA published its Responsible Investment 
Framework in November 2019, which forms the basis 
of this year’s data. Since this is the first year of data 
collection based on the IA’s framework, we expect the 
way that firms report data to us to continue to develop. 
Investment managers’ application of responsible 
investment practices will inevitably flex and change 
to meet evolving investor expectations and a rapidly 
changing investment landscape post Covid-19. As 
we work towards consistency in interpretation, this 
may mean that over time AUM increases as a result 
of changes to reporting as well as asset appreciation 
and the mainstreaming of ESG integration and other RI 
approaches.

THE INVESTMENT ASSOCIATION
38
TABLE 3: DEFINITIONS BASED ON IA RESPONSIBLE INVESTMENT FRAMEWORK

Category                   Definitions 	
ESG Integration


Exclusions 





Sustainability 
Focused  


Impact 
Investing







The systematic and explicit inclusion of material ESG factors into investment analysis and 
investment decisions. ESG Integration alone does 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, including 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 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 
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 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 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 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.
Chart 5 shows that 38% of total assets are integrating 
ESG factors into their investment selection processes. 
This figure is based on firm level policies rather than at 
the individual fund or mandate level. There is often an 
overlap with firms using a combination of approaches 
outlined in the framework. Last year ESG integration 
stood at 26% of total assets, so there has been 
considerable growth. Exclusion policies are applied to 
19% of total AUM. Despite the growth in AUM and the 
investor interest reported by members, sustainability-
focused approaches and impact investing remain a 
relatively small proportion of the industry with 1.4% 
and 0.3% of assets respectively. 
CHART 5: PROPORTION OF ASSETS UNDER MANAGEMENT 
BY RESPONSIBLE INVESTMENT CATEGORY 
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
ESG Integration              Exclusions                  Sustainability                      Impact

39
ASSET MANAGEMENT SURVEY 2019-20 | LESSONS FROM 2020 AND CHALLENGES AHEAD
2
4: ENHANCING UK INTERNATIONAL 
STANDING IN THE CONTEXT OF BREXIT
The UK investment management industry 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. 
Last year we spoke to a range of firms to capture their 
views on maintaining the UK’s competitive advantage in 
a post-Brexit environment and the conditions needed 
for future growth. This year we asked firms again about 
their views, following the UK’s exit from the EU on 31 
January 2020 and as all eyes are on the negotiations as 
we edge closer to the end of the transition period on 31 
December 2020.  
FIGURE 8: FOUR MEASURES OF A GLOBAL INDUSTRY
CUSTOMERS
43% of total assets managed 
in the UK are for overseas 
customers. Half of those are 
in the rest of Europe.
MARKETS
71% of the shares managed 
in the UK are invested in 
overseas markets – for 
domestic and overseas 
customers.
COMPANIES
The UK attracts firms from 
around the world. Companies 
headquartered outside the UK 
are responsible for 59% of 
total assets managed here.
ECONOMIC 
CONTRIBUTION
4.2% of total UK service 
exports from the investment 
management industry.
Firms have been preparing for a range of scenarios, 
including a no deal Brexit, for a number of years but 
many are concerned about business continuity given 
the shortening negotiation timelines and increasing 
demands on government resources due to Covid-19. 
For some firms, the outcomes of these negotiations 
could pose the single biggest threat to the UK’s 
position as a financial services centre, and its overall 
attractiveness as a venue for their operations when 
measured against other emerging centres.
“The end of the Brexit transition is on 
all of our minds and is approaching very 
rapidly. That free trade agreement and the 
treatment of financial services still dwarfs 
anything else in relation to issues for the 
UK as an international financial centre. 
Making sure there is an agreement in place 
is the biggest dependency.”

THE INVESTMENT ASSOCIATION
40
“The industry will be carefully watching 
what the trade agreement looks like with 
the EU and the extent to which it draws 
a line under negotiations and the future 
relationship. There is a big difference 
between scenarios where various countries 
are trying to chisel away pre-eminence of 
UK financial services vs. having positioned 
things very securely in a long-term 
agreement. It creates a different mindset 
around the extent to which executives have 
to be worried about those issues on an 
ongoing basis.” 
Many IA members run global businesses and in every 
interview we held, the ability to delegate portfolio 
management functions was raised as the most critical 
area of uncertainty that needs to be addressed in 
order to continue to serve customers internationally. 
Delegation is an international norm that allows 
investors access to global expertise and investment 
opportunities, whilst also benefitting from significant 
cost savings
“The battle is going to be to make sure 
delegation rights for fund managers 
operating out of the UK and managing 
assets for other European fund domiciles. 
If that is threatened, it is bad news for 
the investment management industry and 
you will have to move more substance to 
Europe.” 
Looking beyond Brexit, there are a number of aspects 
that continue to give investment managers confidence 
in the UK despite the political uncertainty. One of 
the key features of UK financial services are the 
city clusters such as those located in London and 
Edinburgh. The physical proximity of the industry to 
other market participants, such as investment banks, 
wider professional services, including legal and audit, 
and most recently fintech are key components of the 
UK’s success. 
Following the onset of Covid-19, the investment 
management industry transitioned very quickly and 
effectively to remote working. This raises a question over 
whether city clusters could become less significant, 
particularly given real estate costs. However, for many the 
pandemic has reinforced the importance of the physical 
proximity to teams, clients and ancillary industries. Firms 
we spoke to for the Survey have noted that external 
networks and relationships are particularly difficult to 
navigate once outside the cluster. 
“In most industries, including finance, 
there is a benefit in clustering. Despite the 
Covid-19 effect, where we’ve all learned 
how to work remotely, industries do tend 
to cluster and proximity is important for 
making sure you have a good flow of talent 
and sharing ideas.” 
“In our Brexit planning we looked at all 
sorts of permutations for how we should be 
structured as an organisation. When you 
start looking at other potential locations 
you start to realise how much is here. The 
Fintech community here is very vibrant and 
is an important part of why you would 
come here.”

41
ASSET MANAGEMENT SURVEY 2019-20 | LESSONS FROM 2020 AND CHALLENGES AHEAD
2
The breadth and depth of the talent pool in the UK is 
another key feature of UK investment management 
that is often underestimated. Many globally 
headquartered firms have indicated that the talent 
pool is a key driver in setting up regional offices in the 
UK versus other jurisdictions. As long as Brexit does 
not impact the UK’s ability to attract global talent, 
the continued success of the UK as an investment 
management centre is assured.
“If you look at the talent and the 
infrastructure we have here- that is not 
easily replicated in other locations quickly. 
That is why it continues to attract people. 
The UK will remain the leading financial 
services and investment management 
centre.” 
While certain immutable advantages such as time 
zone, language, and a stable legal system have helped 
the UK position itself as a global leader in investment 
management, it is clear that post-Brexit this alone 
will no longer be sufficient. In order to ensure that the 
UK remains a dominant player on the international 
stage, regulators must create an attractive operating 
environment that does not place an undue burden on 
firms. More broadly, firms point to the importance of 
the wider environment for business, notably around 
critical points such as the tax regime, immigration and 
the broader operating infrastructure.
While the industry recognises the value of robust, 
customer-focused regulation, there are also examples 
in recent years of approaches to regulation that 
have made the UK increasingly less attractive for 
international firms. Notably, the Financial Services 
Compensation Scheme (FSCS) has an important 
purpose in protecting consumers when firms fail, 
but because it does not operate on a ‘polluter pays’ 
principle, its recent funding mechanisms have focused 
disproportionately on firms with little direct connection 
to the problems it is trying to address. The annual levy 
on firms has also risen significantly in recent years and 
is variable, making it a financial forecasting challenge 
for firms. 
“The weight of regulation over the last 5 
years has been enormous. The way that the 
FSCS has been structured is specifically 
disincentivising large international offshore 
managers setting up in the UK. In the 
context of competing as an international 
centre, the volume of regulation are straws 
that look like collectively breaking the 
camel’s back. You can’t be complacent 
about the UK’s attractiveness.”

42
THE INVESTMENT ASSOCIATION
3 TRENDS IN CLIENT ASSETS 
AND ALLOCATION
CLIENT TYPE
>>  Institutional clients remain the largest client 
group accounting for four fifths of assets under 
management (79%) 
>>  Pension schemes continue to be the largest 
institutional client type with 43% of total assets 
in 2019, slightly down on 2018. Corporate client 
assets have seen the largest year on year increase 
accounting for 6% of all assets.   
>>  Consistent with previous findings, 55% of assets 
were managed on a segregated basis and 45% on 
a pooled basis.
ASSET ALLOCATION
>>  Allocation to equities increased from 36% in 2018 
to 38% in 2019 reflecting the resurgence of equity 
markets in 2019. Fixed income allocation was the 
biggest loser falling 1.8 percentage points on last 
year to 32%. All other asset classes remained 
largely unchanged from 2018.
>>  Within equities the UK allocation fell below 30% for 
the first time to 29%, representing an 18 percentage 
point fall in allocation over the last decade. Given 
performance of UK equities relative to global 
indices, it is likely that the region continues to 
attract flows from certain client segments. 
>>  The shift to overseas fixed income has stalled in 
2019 with allocations unchanged at 50% year 
on year. 
GROWTH OF INDEXING MARKET
>>  2019 saw an acceleration in the growth of indexing 
strategies, which increased four percentage points 
to reach 30% of total assets.  
>>  Contributing to the growth in indexing is the very 
strong growth in ETFs. Total global assets in ETFs 
increased 30% year on year. Although still largely 
dominated by US domiciled funds, 2019 saw assets 
in Irish domiciled funds increasing over 50% to 
$620 billion.  
INVESTMENT IN THE UK ECONOMY
>>  Despite reduced allocations to UK assets as a 
proportion of total assets, IA members remain 
significantly invested in the UK economy holding 
£1.6 trillion in UK equities, corporate bonds, 
commercial property and, increasingly in recent 
years, in infrastructure. This is particularly 
important given government indebtedness and 
heightened economic uncertainty. 
>>  Infrastructure investments have reached £45 billion, 
three quarters of which is invested in economic 
infrastructure such as roads and rail, with the 
remaining quarter invested in social infrastructure 
such as public schools or hospitals. This is up from 
£35 billion in 2018. 
KEY FINDINGS
79%  
OF ASSETS ARE MANAGED ON 
BEHALF OF INSTITUTIONAL 
CLIENTS.

43
INVESTMENT MANAGEMENT SURVEY 2019-20 | TRENDS IN CLIENT ASSETS AND ALLOCATION
3
This Chapter looks across the entire UK-managed 
asset base of IA members and documents how these 
assets are split between different client groups, 
how they are allocated across asset classes and 
geographies, and what proportions are managed on an 
active or indexed basis. The distinctions are not always 
entirely clear, for example the line between retail and 
institutional is becoming increasingly blurred in the 
context of the growth in DC pensions. The institutional 
and retail markets are covered separately and in more 
detail in Chapters 4 and 5 respectively.11
CLIENT TYPES
Chart 6 provides an overview of UK managed assets 
by client type. The relative size of different client 
segments changes very little year on year. The vast 
majority (79%) of assets continue to be managed on 
behalf of institutional clients in 2019 with retail client 
broadly unchanged at 21%. The largest institutional 
client segment are pension funds which make up 43% 
of all assets under management, down from 46% in the 
previous year despite a £155 billion increase in assets.
The largest relative increase has been amongst 
corporate clients who make up 6% of total assets, 
almost double the level it was five years ago. Combined 
insurance assets were down once again this year, falling 
one percentage point to 13% of total assets. 
CHART 6: ASSETS MANAGED IN THE UK BY CLIENT TYPE 
2019
Private 
2.3%
Retail 
18.7%
Institutional
79.0%
Pension funds 43.1%
Public sector 4.9%
Corporate  6.0%
Non-proﬁt 1.3%
Sub-advisory 4.8%
In-house insurance 5.2%
Third-party insurance 7.6%
Other 6.0%
The definition of pension funds in the IA’s data includes 
all schemes, both defined benefit (DB) and defined 
contribution (DC) where the scheme has a direct 
relationship with the asset manager, notably DB 
schemes and some of the larger DC schemes, including 
master trusts. However, the direction of travel in the 
pension provision market, with the ever-increasing 
importance of DC schemes, is making the distinction 
between the different client types more challenging. 
11  Chapter 4 relates to money managed for UK institutional investors by IA members globally. It does not reflect money managed in the UK for all 
institutional clients.
BLURRING OF CLIENT TYPES
Insurance vs Pension
DC pension assets that are operated via life 
companies wrapping funds are not included in 
pension fund assets but are rather reflected 
in assets managed on behalf of insurance 
companies. This includes assets managed for 
personal pension and Group personal pensions 
(GPPs). This blurs the line between pension and 
insurance assets and means that the allocation 
to pension funds understates actual pension 
investment. 
Retail vs Institutional
DC is something of a hybrid between retail and 
institutional. Pension savers in DC schemes 
receive an income in retirement that is based on 
the value of the pension pot they have accrued 
during their working life. Unlike a DB scheme, 
where their pension is based on their salary and is 
ultimately guaranteed by an employer, the value of 
a DC pension is determined by the contributions 
an individual makes to their plan and the return 
on assets they achieve on the investment 
strategies they select. The ultimate investment 
risk lies with the individual rather than the 
employer, and in this regard DC pensions are more 
akin to retail investments than institutional, albeit 
they will appear in the IA's data either as Pension 
fund or Insurance assets.

THE INVESTMENT ASSOCIATION
44
HISTORIC EVOLUTION OF CLIENT ASSETS
As discussed, there is very little variation in the 
composition of the client base year on year, however we 
observe more significant changes in the market when 
we look back over data from the last decade. The split 
between retail and institutional clients has remained 
broadly unchanged for over a decade with about 80% of 
assets managed on behalf of institutional investors and 
20% of assets managed on behalf of retail investors. 
The composition of the institutional market is where 
the most significant changes in client base can be 
observed (Chart 7). The most consistent long term 
trend has been the decline in insurance assets, which 
are almost half the level they were a decade ago 
as a proportion of total assets. In-house insurance 
assets have seen significant falls whereas third party 
insurance assets have increased as a proportion of the 
overall total, possibly as a result of demerger activity. 
Insurance assets’ share of total assets has fallen 10 
percentage points over the last decade. The lost market 
share has been absorbed by other institutional (most 
notably corporate clients) and pension assets which 
have both increased their share of total assets by 6 
percentage points over the last decade.
CHART 7: PROPORTION OF ASSETS MANAGED IN THE UK 
BY CLIENT TYPE (2009-2019)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2009                                                             2019
Pension funds            Insurance            Other institutional              
Retail            Private clients
Looking at the growth of assets over time in nominal 
terms sheds some light on the drivers of the changing 
composition in the institutional client base. Chart 
8 illustrates that since 2013 pension assets have 
outpaced the growth in retail and Other institutional 
assets, almost doubling their assets over the period.
As we will see in Chapter 4, a large component of the 
growth in pension assets has been the significant 
rise in liability driven investment (LDI) by DB pension 
schemes looking to manage the run off of their 
liabilities. To a lesser extent it will also reflect the 
increased pension participation resulting from 
automatic enrolment, much of which has been invested 
into master trust arrangements.
While pension asset growth has taken off, insurance 
assets have flatlined in nominal terms. We have seen 
some significant demerger activity over recent years 
that would explain some of the decline in in-house 
insurance assets. However, another component of this 
is the evolving business models of those insurance 
owned firms. These firms have increasingly diversified 
businesses and the majority are no longer reliant 
on the insurance business as the primary source of 
revenue growth. 
CHART 8: ASSETS MANAGED IN THE UK BY CLIENT TYPE, 
(2009-2019)
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Insurance                                Pension Funds                           Other Institutional
Retail
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
£bn

45
3
INVESTMENT MANAGEMENT SURVEY 2019-20 | TRENDS IN CLIENT ASSETS AND ALLOCATION
SEGREGATED VS. POOLED
Chart 9 shows the split of total assets under 
management between segregated mandates and 
pooled investments. The figures were very marginally 
changed year on year with 55% of assets managed 
on a segregated basis and 45% on a pooled basis in 
2019. This data has seen very little fluctuation for over 
a decade despite the substantial evolution in product 
offerings in the pooled fund universe, particularly 
the rise of ETFs alongside more established indexing 
vehicles. Segregated mandates continue to be heavily 
used in the traditional institutional market.
CHART 9: SEGREGATED VERSUS POOLED INVESTMENT 
(2009-2019)
60%
50%
40%
30%
20%
10%
0%
2009                                                                    2019
Segregated                  Pooled
ASSET ALLOCATION
The overall mix of assets at the end of 2019 can be 
seen in Chart 10 which also shows the evolution in 
asset class allocation over the last decade. Asset class 
movements year on year tend to be consistent with 
market performance. Last year saw a four percentage 
point fall in equity allocation to 36% due to equity 
market downturns in the last quarter of 2018. As we 
saw in Chapter 1, equity markets have rebounded 
strongly in 2019 resulting in an increase in allocation to 
38%. The higher relative allocation to equities came at 
the expense of fixed income and property which were 
both down one percentage point year on year to 32% 
and 2% respectively. Allocations to cash and ‘Other’ 
remained broadly unchanged. 
The long term trend as shown in Chart 10 suggests 
a structural shift in asset allocation over the last 
decade towards a significantly increased allocation to 
‘Other’. Other assets include assets in private markets 
and solutions type strategies. The most substantial 
component of ‘Other’ will be Liability Driven Investment 
(LDI) strategies which are largely derivatives based. 
Allocations to ‘Other’ have increased from 5% in 2009 
to 22% in 2019 however this trend has slowed down 
since 2015 with assets increasing two percentage points 
in the last four years. Equity and fixed income remain 
the two largest asset classes, making up 70% of total 
assets, however this is down from 81% in 2009. ‘Other’ 
overtook cash as the third biggest asset class in 2011. 
CHART 10: OVERALL ASSET ALLOCATION OF UK-
MANAGED ASSETS (2009-2019)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2009                                                                   2019
Equities             Fixed income              Cash               Property               Other
38%  
ALLOCATION 
TO EQUITIES INCREASED 
FROM 36% IN 2018 TO 
IN 2019

THE INVESTMENT ASSOCIATION
46
IA members invest across a range of asset classes. 
Almost all IA members are invested in equities to 
varying degrees, with a lower proportion investing 
in fixed income. Just under one third of Survey 
respondents (30%) are specialists investing only in 
either equities or fixed income, often also combining 
this with allocations to cash. 
TABLE 4: PROPORTION OF IA MEMBERS INVESTING BY 
ASSET CLASS 
	
Percentage of firms 
Equities 	
93% 
Fixed income 	
75% 
Cash 	
78% 
Property 	
40% 
Other 	
57%

GROWTH OF PRIVATE MARKETS
A growing component of ‘Other’ is the allocation to 
private market assets. We do not collect a granular 
breakdown of this data, so we cannot quantify the 
size of these investments by IA members. However, we 
reference global data to get a sense of the size of the 
investment opportunity in this space. 
As Chart 11 shows, the growth in private market assets 
under management globally continued to increase 
through 2019 and has accelerated significantly in 
recent years. The drivers of this trend in the UK have 
been well explored, including in previous editions of 
the Investment Management Survey. From the demand 
side, record low interest rates have created a ‘hunt 
for yield’ further afield than the public bond markets. 
Investors desiring diversification of risk and superior 
returns are also looking to private markets against 
a back drop of long term de-equitisation by UK DB 
pension schemes.
CHART 11: GLOBAL ASSETS UNDER MANAGEMENT IN 
PRIVATE MARKETS (2009-2019) 
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0
2009    2010    2011    2012    2013     2014    2015    2016    2017    2018     2019
Private equity                   Real estate                               Infrastructure     
Private debt                      Natural resources
$Trn
$2.7
$3.0
$3.3
$3.8
$3.9
$4.2
$4.5
$5.3
$6.1
$7.3
$2.4
 Source: Preqin
$7.3  
GLOBAL ASSETS 
UNDER MANAGEMENT 
IN PRIVATE MARKETS 
INCREASED 20% IN 2019 TO 
TRILLION

47
INVESTMENT MANAGEMENT SURVEY 2019-20 | TRENDS IN CLIENT ASSETS AND ALLOCATION
3
On the supply side, many companies have found 
public market listing a less attractive route for a range 
of reasons, including perceived complexity and the 
relative cost of capital elsewhere. In the UK, this has 
resulted in a decline in listed companies. Chart 12 
illustrates the scale of the change over the last two 
decades, while also suggesting that there could be 
long-term cyclical elements at work, given previous 
patterns of decline and recovery.
CHART 12: NUMBER OF COMPANIES LISTED ON UK 
MARKETS (1975-2019)
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
3,500
3,000
2,500
2,000
1,500
1,000
500
0
 Source: World Bank, LSE
DETAILED ASSET ALLOCATION
Beyond the shifts between asset classes, the IA also 
monitors the trends within equity and fixed income 
allocations according to type of exposure and this 
section considers these changes in more detail.
EQUITY BY REGION
The most striking long term trend in regional equity has 
been the decreasing allocation to UK equity relative 
to overseas equity (Chart 13). In 2019, this figure fell 
one percentage point to 29%. Until 2019 allocations 
to UK equity have fluctuated around the 30% mark for 
a number of years but 30% had never been breached. 
The picture is different when looking at allocations to 
UK equities in the UK funds market (Chapter 5) and in 
the DB pension market (Chapter 4) which have seen 
consistent declines in UK equity allocations. 
Our aggregate data on UK equity AUM does not allow us 
to distinguish between market performance and flows 
so it is difficult to draw definitive conclusions. However, 
based on market performance data alone we would 
expect to see more of a decline in UK equity allocations 
given that UK equities have underperformed global 
markets over the last few years. Instead, the UK 
equity allocation has stabilised over the last few years 
suggesting that it continues to attract quite significant 
inflows from other institutional investors. Stripping out 
price return from total return suggests that UK equities 
produce higher income relative to other global markets. 
Superior dividend payments from UK equities could 
be a driver of the continued interest from overseas 
institutional investors. 
Equity allocations are dominated by investments in the 
UK, North America and Europe which make up 74% of 
total equity assets, slightly down from 77% a decade 
ago. European equities has been consistent at 23% for 
a number of years whereas there has been consistent 
growth in the proportion of North American equities 
to 22% in 2019, an increase of one percentage point 
from 2018. These assets will be heavily dominated 
by US equities where market performance has been 
remarkably strong. Asia pacific (ex. Japan) allocations 
have been more volatile over the last decade but 2019 
saw allocations increasing 1.6 percentage points year 
on year to 9%.

THE INVESTMENT ASSOCIATION
48
CHART 13: UK-MANAGED EQUITIES BY REGION (2009-
2019)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2009     2010     2011    2012     2013    2014    2015     2016    2017    2018     2019
UK                                                         European (ex UK)                           North America
Asia-Paciﬁc (ex Japan)               Japan                                                   Latin America
Africa                                                   Emerging Market                           Other
FIXED INCOME BY REGION
Fixed income exposure has historically been more 
domestically focused than equities. In 2019, similar 
to last year, 50% of all fixed income assets were in 
domestic bonds compared with 66% in 2011. 
Within the domestic market, the proportion of assets in 
conventional UK government bonds has continued to 
decline from 21% in 2011 to 13% in 2019. Allocations 
to index-linked government bonds have tended to 
fluctuate year on year but were up two percentage 
points in 2019. We have collected more data on the 
overseas market in 2019 and observe that despite 
the falling allocation, assets in UK government bonds 
incl. index linked (26%) remain higher than overseas 
government bonds (18%). 
The biggest losers since the Brexit referendum have 
been sterling corporates, which since 2015 are down 
almost ten percentage points to 17%. This means 
that allocation to sterling corporates is lower than the 
allocation to Non-sterling corporates (19%). 
There are a number of potential drivers of these shifts. 
The growth in allocation to overseas bonds reflects the 
increasing globalisation of the investment process. 
However, the acceleration in the growth of allocation to 
overseas bonds since 2015 has coincided with the UK’s 
decision to exit the European Union. The heightened 
political and economic uncertainty caused by Brexit 
has meant that firms have been looking to reduce their 
exposure to the UK market. The trend slowed at the 
end of 2019, despite the imminent departure from the 
European Union, which suggests that there is a third 
driver at play. Increased pension scheme derisking as 
scheme members age and require a higher allocation to 
bonds is leading to more much money chasing a limited 
supply of UK bonds. This is causing pension schemes 
to seek investment opportunities through bonds issued 
overseas. 
CHART 14: ALLOCATION OF UK-MANAGED FIXED INCOME 
BY TYPE AND REGION (2011-2019)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2011       2012        2013        2014        2015       2016        2017       2018        2019
UK government (ex index-linked)                Sterling corporate
UK index-linked                          Other UK                     Overseas
Overseas Govt                              Non-sterling corporate
Non-sterling other
50%  
IN 2019, 
SIMILAR TO LAST YEAR 
OF ALL FIXED INCOME 
ASSETS WERE IN 
DOMESTIC BONDS

49
3
INVESTMENT MANAGEMENT SURVEY 2019-20 | TRENDS IN CLIENT ASSETS AND ALLOCATION
GROWTH OF INDEXING MARKET 
Chart 15 illustrates the use of indexing strategies 
across the UK managed asset base and how this has 
evolved over the last decade. In 2009 indexed assets 
as a proportion of total assets under management 
stood at 20% and have grown very steadily since then. 
2019 saw a notable jump in this figure to 30%, a four 
percentage point increase year on year. 
Use of indexing is more prevalent amongst UK 
institutional investors but is rapidly increasing 
amongst UK investors in the retail funds market. IA 
data on retail fund flows shows 2019 to be a bumper 
year for net flows into index funds with record net sales 
of £18 billion. Over the last two years, net retail sales 
to index trackers have propped up fund sales overall: 
sales to index trackers were £27 billion over 2018 and 
2019 compared with almost £10 billion in net outflows 
from active funds over the same period.  
CHART 15: INDEXING STRATEGIES AS PROPORTION OF 
TOTAL UK ASSETS UNDER MANAGEMENT (2009-2019)
35%
30%
25%
20%
15%
10%
5%
0%
2009    2010    2011    2012    2013    2014    2015    2016    2017    2018    2019
In 2019 just under half (44%) of equity assets and 
less than one third (30%) of fixed income assets were 
managed on an indexed basis. 
One striking trend from the last year has been the 
growth in assets under management in the ETF market. 
Although only a small number of IA members are active 
players in the provision of ETFs, it is likely that the 
growth in demand for these vehicles is contributing to 
the increasing overall allocation to index strategies. 
30%  
AT THE END 
OF 2019, INDEXING 
STRATEGIES ACCOUNTED FOR 
OF TOTAL AUM

THE INVESTMENT ASSOCIATION
50
An ETF is an open-ended pooled investment vehicle 
with shares that, like a ‘traditional’ fund, will offer 
investors access to a portfolio of stocks, bonds, 
and other assets, most commonly aiming to track 
an index. Unlike a fund, it can be bought or sold 
throughout the day on a stock exchange, which is 
why ETFs are effectively a hybrid of a tradeable 
stock and an index-tracking fund. 
ETFs have seen explosive growth over the last 
decade with global assets under management 
increasing 19% each year on average. After a volatile 
2018, which saw total assets flatline, global AUM in 
ETFs had reached $6.3 trillion in 2019, representing 
a 30% increase on the previous year.  
Chart 16 shows that ETFs domiciled in the United 
States make up 70% of total assets, equivalent to 
$4.4 trillion at the end of 2019. European domiciled 
ETF assets grew at a slightly faster rate on 
aggregate than the US to $1 trillion in 2019. This was 
largely driven by remarkable growth in assets in Irish 
domiciled ETFs which increased 50% between 2018 
and 2019 to $620 billion. Assets in Asian domiciled 
ETFs reached $620 billion, up 38% year on year. 
Assets in Asia are predominantly (65%) in Japanese 
ETFs, though the increase in assets is driven by a 
75% increase in China and Taiwan ETFs.  
CHART 16: ETF ASSETS UNDER MANAGEMENT BY 
REGION OF DOMICILE (2009-2019)
United States                   Europe                               Asia      
Other                                     Canada
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2009    2010     2011    2012    2013    2014    2015     2016    2017    2018    2019
$Bn
Source: Morningstar
Chart 17 splits the growth in total net assets into two 
components:- market appreciation and net flows. The 
US has a more established ETF market and although 
US domiciled funds continue to attract flows, the 
majority of growth (68%) in 2019 came from market 
movements while the remaining 32% came from 
net flows. By comparison almost half of total growth 
came from net flows in Asia and Europe in 2019. 
CHART 17: DRIVERS OF 2019 GROWTH IN ETFS
Flow                            Market movement
1,200
1,000
800
600
400
200
0
United States            Europe                     Asia                      Other                   Canada
$Bn
 Source: Morningstar
ETFs IN EUROPE AND THE UK
European data show that the UK is not a domicile 
for ETFs. Ireland and Luxembourg domiciled funds 
have almost doubled their share of the European 
market over the last decade, accounting for 83% of 
total assets. Assets in both Luxembourg and Irish 
domiciled funds increased significantly in 2019 
by 37% and 54% respectively. For Irish funds in 
particular, 2019 was a bumper year in terms of sales 
with almost three-fifths (57%) of the growth in AUM 
coming from a surge in sales.  
Given that ETFs can be bought and sold from around 
the world, domicile is not the best way to capture 
regional investor appetite for ETFs. ETFs can be 
listed on multiple exchanges and listing location 
can be used as a proxy for investor location. There 
are over 1,200 ETFs listed on UK exchanges with 
total assets of £330 billion, 93% of which are in 
ETF MARKET

51
INVESTMENT MANAGEMENT SURVEY 2019-20 | TRENDS IN CLIENT ASSETS AND ALLOCATION
3
Ireland domiciled funds and the remaining 7% in 
Luxembourg domiciled funds. The majority of UK 
listed ETFs are managed by the small pool of IA 
members who are ETF providers. 
CHART 18: TOTAL ASSETS BY EUROPEAN DOMICILE 
(2009 – 2019)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0% 2009    2010     2011    2012    2013     2014    2015    2016     2017    2018    2019
Ireland                                Luxembourg                                 Germany
France                                Switzerland                                   Jersey
Other
Source: Morningstar
The biggest change in asset allocation within 
European domiciled ETFs over the last decade has 
been in the fixed income space, with allocations 
increasing from 18% in 2009 to 25% in 2019 (Chart 
19).This trend accelerated in 2019 with assets 
increasing 54% year on year.  
CHART 19: PROPORTION OF EUROPEAN ASSETS 
UNDER MANAGEMENT BY ASSET CLASS (2009-2019)
Equity                   Fixed Income                   Commodities                   Other
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2009                                                            2019
 Source: Morningstar
ETFs RESILIENT THROUGH COVID-19
The 2020 market volatility triggered by the 
coronavirus and subsequent economic lockdowns 
saw total global assets in ETFs fall 16% at the end of 
Q1 2020. In terms of net flows, some markets held up 
better than others in March. Most regions were able 
to attract positive net inflows, albeit at depressed 
levels. The clear anomaly was in Europe which saw 
$24 billion in outflows compared with inflows of $8 
billion and $16 billion to US and Asian domiciled 
funds respectively. As was the case in the mutual 
funds world, fixed income ETFs were most heavily 
affected and were trading at a significant discount 
to their net asset value (NAV). Fixed income ETFs 
domiciled across North America and Asia suffered 
heavy outflows but this was offset by equity inflows. 
In Europe however, both equity and fixed income 
ETFs experienced outflows in March of $14 billion. 
As a proportion of assets under management, the 
outflow from fixed income is significantly more 
substantial  in relative terms.. 
ETFs remained resilient throughout the crisis 
despite the high levels of trading on secondary 
markets, and proved to be effective tools in providing 
liquidity within investors’ portfolios. IA members 
pointed to the fact that in the fixed income space 
during March’s period of heightened market stress, 
price discovery was difficult and ETF prices were 
a much clearer indicator of the value of underlying 
instruments than the NAV, which  reflected stale 
valuations at the time. 
By the end of Q2 2020, total assets under 
management had almost completely recovered to 
pre-coronavirus levels given the sharp bounce back 
in performance across global markets. Sales to fixed 
income ETFs have also returned to positive inflows 
across domiciles but at time of writing net sales to 
equity ETFs remain volatile.

THE INVESTMENT ASSOCIATION
52
INVESTMENT IN THE UK ECONOMY 
The investment management industry channels 
savings to capital markets and is therefore a key source 
of funding for the UK economy. This is increasingly 
important in the context of the pandemic and the highly 
uncertain economic outlook. Investment management 
activity has historically focused on more traditional 
asset classes such as listed equities and bonds but 
there is increasing use of private markets most notably 
infrastructure and direct lending. These types of 
investments are especially attractive to DB pension 
schemes and insurers looking for liability driven and 
cash flow driven investment. – see Figure 9. 
We have seen that relative to total assets under 
management there has been a reduced allocation to 
UK equities particularly amongst DB pension schemes 
and retail investors which we will discuss in Chapters 
4 and 5. However in absolute terms, this figure has 
continued to increase which means that the £950 
billion in UK equities held by IA members represents 
36% of total market capitalisation. 
Independent research suggests that investment 
managers have purchased the majority of corporate 
bond issues in recent years holding almost half a 
trillion in sterling corporate bonds. Despite this, as we 
saw earlier in the chapter, corporate bonds have still 
fallen significantly as a proportion of total fixed income 
assets since 2016. In 2019, the amounts invested in 
UK equities and infrastructure have increased 8% and 
28% in nominal terms.
12 The majority of property investment is in commercial property, however a small amount may be allocated to residential accommodation, notably 
student housing. The majority of infrastructure investment is UK but some may be invested overseas.
FIGURE 9: IA MEMBER HOLDINGS IN UK ASSET CLASSES12
COMMERCIAL
PROPERTY
£195bn
STERLING
CORPORATE
BONDS
£450bn
UK EQUITIES
£950bn
INFRASTRUCTURE 
£45bn
IA
MEMBERS

53
INVESTMENT MANAGEMENT SURVEY 2019-20 | TRENDS IN CLIENT ASSETS AND ALLOCATION
3
INVESTMENT IN UK INFRASTRUCTURE
The amount of investment reported by UK investment 
managers into infrastructure increased to an estimated 
£45 billion in 2019, up from £35 billion in 2018. This 
reflects both the increase in assets overall but also 
the increased interest in private market investment 
reported in recent years.
The proportion of infrastructure investment allocated 
to economic projects increased slightly (78%) but was 
broadly in line with recent years where three quarters 
of infrastructure investment was reported to be in 
economic projects. These include a variety of schemes 
such as energy generation and metering, transport, 
utilities and environmental schemes such as flood 
protection. 
The remaining 22% was invested in projects which 
offer a social benefit, particularly the construction 
and maintenance of schools and healthcare-related 
projects such as the construction of hospitals (see 
Figure 10).
FIGURE 10: INFRASTRUCTURE INVESTMENT BY IA MEMBERS
ECONOMIC
78%
SOCIAL
22%
SCHOOL
H
£45BN  
IA MEMBERS INVESTED 
IN UK INFRASTRUCTURE 
IN 2019

THE INVESTMENT ASSOCIATION
54
FIGURE 11: SELECTION OF UK INFRASTRUCTURE 
INVESTMENT FACILITATED BY IA MEMBERS
PUBLIC BUILDINGS 
RENEWABLE ENERGY
UTILITIES (GAS/ELECTRIC)
ROAD/RAIL/AIR/PORT
STUDENT ACCOMMODATION
WASTE/WATER 
MANAGEMENT
TELECOMMS
  
The range of projects facilitated by IA members on 
behalf of their clients is extremely broad and Figure 11 
provides a flavour of the type and location of projects 
that have been supported by UK investment managers 
in recent years. 
Green energy projects are particularly important and 
a significant proportion of projects supported by IA 
member firms are solar farms or onshore and offshore 
wind farms.
In addition to the examples illustrated, members invest 
in other projects, which have a greater geographical 
reach and therefore cannot be shown in this figure. This 
includes projects such as the introduction of new rail 
rolling stock and the installation of fibre broadband.

55
INVESTMENT MANAGEMENT SURVEY 2019-20 | UK INSTITUTIONAL CLIENT MARKET
4 UK INSTITUTIONAL CLIENT 
MARKET
MARKET OVERVIEW
>>  IA members manage £4.0 trillion for UK institutional 
clients in offices around the globe, although the 
large majority (90%) is managed in the UK. This is 
unchanged year on year.
>>  Pension funds are the largest client type, with 65% 
of institutional assets under management, followed 
by insurance companies at 22%. The proportion of 
assets managed for pension funds has increased 
substantially over the last decade.
>>  UK institutional customers have generally been 
taking a limited approach to portfolio change 
through the Covid-19 crisis, but there has been 
a greater focus on issues such as income and 
liquidity.
EVOLUTION OF PENSIONS MARKET 
>>  £2.6 trillion is managed for UK pension schemes 
by IA members, with corporate pension schemes 
representing the greatest proportion of assets, at 
£2.3 trillion.
>>  The wider pensions market, including individual 
pensions, drawdown and assets backing the 
annuity book, is now estimated at £3.8 trillion, with 
IA members managing a significant part of this 
through institutional mandates and funds.
>>  The DC market has not seen significant changes to 
investment behaviour through the Covid-19 crisis, 
but clear risks to contribution levels exist given 
wider pressures on both firms and employees.
THIRD PARTY MARKET
>>  Once in-house mandates are excluded from the 
institutional data, assets under management stand 
at £3.4 trillion, unchanged from 2018.
>>  Pension funds are even more dominant in the third 
party market, accounting for almost three quarters 
(72%) of third party assets. 
>>  Assets managed in liability-driven investment 
strategies reached an estimated £1.4 trillion in 
2019, up from £1.3 trillion in 2018.
MANDATE TYPES 
>>  Multi-asset, or ‘balanced’ mandates, account for 
about a quarter (24%) of total mandates once LDI 
mandates are excluded (down slightly from 2018). 
      The breakdown of specialist mandates shows fixed 
income remaining the largest category at 40%, up 
one percentage point from 2018.
>>  Just over two thirds (69%) of assets were managed 
actively. All institutional client types were more 
likely to be managed on an active than an indexing 
basis.
>>  Almost two thirds (64%) of third party institutional 
mandates were managed on a segregated basis, 
down slightly from 2018. 
KEY FINDINGS
4

56
This Chapter looks at the shape of the UK institutional 
client market. It differs from previous chapters in two 
key respects:
• It covers all assets irrespective of whether they 
are managed in the UK or in offices overseas: we 
estimate that more than 90% of the assets are 
managed in the UK. 
• It focuses on the nature of a mandate rather than on 
the underlying assets. So a global equity mandate 
will appear as such, rather than being broken down 
into the underlying constituent countries. 
In addition to key data points on client types and 
the evolution of the third party institutional market, 
the analysis considers the impact of the Covid-19 
pandemic on the DC pensions market in the UK and 
the effect it might have on the millions of savers 
automatically enrolled into DC pensions since 2012.
13  Implied figure based on data collected on an estimated 84% of the institutional client base.
14  The remaining 12% of assets is made up from mandates managed for corporations (outside of pension assets) sub advisory, not for profit 
mandates and public sector mandates. One third of this (4%) is managed for ‘other’ client types, which generally refers to a variety of open-and 
closed-ended pooled vehicles, and investors from the more specialist areas of private equity, venture capital and property.
MARKET OVERVIEW
IA members manage £4.0 trillion13 for UK institutional 
clients globally, in line with the figure from the end 
of 2018. There were estimated outflows from UK 
institutional clients of £40 billion during the year.
CLIENT BREAKDOWN
Chart 20 shows that pension funds and insurance 
companies (including in-house and third party 
management) continue to account for the vast majority 
of UK institutional assets (88%)14 with pension funds 
remaining the largest client type. 
CHART 20: UK INSTITUTIONAL MARKET BY CLIENT TYPE
Corporate pension scheme 56.8% 
Other 4.1% 
Third Party Insurance 
11.8% 
In house insurance 
10.6% 
Sub-advisory 3.6% 
Corporate 2.9% 
Non-proﬁt 1.0% 
Public sector 0.8% 
Other pension 2.5% 
LGPS 6.1% 
IA MEMBERS MANAGE   
£4.0TRN  
FOR UK INSTITUTIONAL 
CLIENTS IN OFFICES 
AROUND THE GLOBE

57
INVESTMENT MANAGEMENT SURVEY 2019-20 | UK INSTITUTIONAL CLIENT MARKET
4
There has been a striking increase in the proportion of 
assets managed for pension funds since the IA began 
monitoring this data in 2011. The same period has seen 
a substantial decrease in the proportion of institutional 
assets managed for insurance clients, most notably 
in-house insurance. 
The relative fall in in-house insurance assets does 
seem to be stabilising, with the allocation to in-house 
insurance assets almost unchanged year on year 
at 10.6%, but still three percentage points down on 
two years ago and down from 31% when the IA first 
collected this data in 2011. 
The fall in in-house insurance assets may reflect both 
a reduction in the proportion of underlying assets 
managed in house but also assets which move from in-
house to third-party as merger and acquisition activity 
continues to take place in the industry. The proportion 
managed for third-party insurance has increased from 
6% to 12% since 2011.
It should be noted that DC pension assets operated 
via an intermediary platform through an insurance 
company are reflected in the IA’s insurance assets. 
Consequently pension assets are actually under-
represented in the Chart 21 and the shift in assets 
towards pension funds is even stronger than is implied. 
CHART 21: UK INSTITUTIONAL MARKET BY CLIENT TYPE 
(2011-2019)
100%
80%
60%
40%
20%
0%
2011        2012        2013        2014        2015        2016        2017        2018        2019
Pension Funds                           Public Sector                            Non-proﬁt               
Corporate                                      Sub-advisory                           In-house Insurance       
Third Party Insurance             Other 
EVOLUTION OF PENSION MARKET
In 2019, pension funds continued to account for more 
than half of the institutional client base (£2.6 trillion). 
The IA defines pension funds as DB and DC schemes 
where the asset manager has a direct relationship with 
the pension fund rather than it being distributed via a 
wrapped product through an insurance company.
The IA divides pension scheme assets in three 
categories:
• Corporate pension funds, which again represented 
the majority of UK pension fund assets in 2019, 
at £2.3 trillion. This category includes a number 
of in-house Occupational Pensions Scheme (OPS) 
managers, which we estimate manage around £175 
billion in assets.
• The Local Government Pension Scheme (LGPS) 
which accounted for £245 billion of assets in 2019, 
indicating that IA members manage around 85% of 
LGPS assets.
• Assets managed for pension schemes that do not fit 
into either of these categories, such as those run for 
not-for-profit organisations, representing £100 billion.
Corporate pensions are still dominated by DB schemes, 
which accounted for a total of £2.1 trillion in corporate 
pension assets at the end of December 201915. 
15  Includes assets in the PPF 7800 index plus an estimate of assets in crown guaranteed schemes. This figure is not a direct subset of the £2.3 
trillion managed for corporate pensions by IA members as some DB assets will be managed by non-IA members.

THE INVESTMENT ASSOCIATION
58
The extreme market volatility in March 2020 
triggered a very sharp sell-off in the retail funds 
market. On the institutional client side members 
reported that on the whole, selling activity was 
limited. Institutional clients tend to not react to 
this sort of news in the short term or make major 
changes to their asset allocation. Pension assets 
in particular, where investment horizons are 
typically between 20-30 years, have not reacted 
significantly compared with the record outflows 
from fixed income funds observed in the retail 
market. Participants in our roundtable discussion on 
DC pension scheme members’ behaviour during the 
pandemic on pages 60 to 63 also acknowledged the 
fact that generally member activity has been limited. 
“We have not seen much investor action 
at this point. The performance itself has 
been a bit up and down but our relative 
performance has been quite good which 
helps retain clients. We had one or two 
investors that needed some liquidity for 
issues in their portfolio elsewhere but 
we haven’t see a wholesale change in 
terms of taking money out. Interestingly, 
some are coming back to talk about 
equity because now may be the time to 
be investing in more actively managed 
mandates again.” 
IA members reported that some institutional 
clients were more focused on liquidity than others. 
For example those managing assets on behalf of 
charity clients saw higher demand for liquidity in 
the portfolios as charities saw their incomes fall 
during a period of time when their expenditure rose 
considerably supporting those affected by Covid-19. 
A number of firms also reported outflows from 
insurance clients who were building reserves to pay 
claims, including substantial business interruption 
claims. 
“We saw some of the regulated/life 
insurance type clients de-risking for 
capital reasons. If you’re in equities 
and risky credit, it has a higher capital 
charge, so when capital is tight there is 
a tendency to want to de-risk. This has 
the unfortunate effect that you’re selling 
risky assets at the worst possible time 
and that is something we’ve seen in 
every single crisis sadly.” 
 
“Since the immediate crisis we have 
seen quite substantial inflows into 
investment grade credit. It is quite hard 
for us to gauge whether that is people 
switching out of more risky credit into 
investment grade or if it is coming from 
cash and sovereigns into IG.” 
Member engagements with institutional clients 
have been broadly optimistic. Many made 
comparisons with the conversations they were 
having with clients during the GFC where many 
institutional clients were concerned about the 
long term viability of companies. This time round 
institutional clients have been focusing on the 
operational resilience of companies and building 
more sustainable portfolios. 
“On the institutional side, this crisis 
has been very different from the GFC. 
In the GFC there were more questions 
on how we build financially safer 
and more secure businesses to avoid 
these worries. In this crisis the debate 
and engagement with sophisticated 
investors has been around how we build 
better and greener strategies, what 
are the different investments, how are 
supply chains coping, overall resilience 
and oversight as a fund manager.” 
  
INSTITUTIONAL CLIENT BEHAVIOUR THROUGH COVID-19

59
INVESTMENT MANAGEMENT SURVEY 2019-20 | UK INSTITUTIONAL CLIENT MARKET
4
FIGURE 12: OVERVIEW OF THE UK’S PENSION LANDSCAPE16
TOTAL ASSETS OF APPROXIMATELY £3.8 TRILLION (2019)
WORKPLACE PENSIONS
INDIVIDUAL
PERSONAL
PENSION/SIPP
ASSETS IN 
INCOME 
DRAWDOWN
ASSETS BACKING 
ANNUITIES
DB
£2.1 TRILLION
DC
£460 BILLION
DC
£600 BILLION
£150 BILLION
£400 BILLION
TRUST-BASED
£240 BILLION
CONTRACT-BASED
£220 BILLION
 
16  Source: ONS, FCA, PPI, IA, DCLG, MoretoSIPPs. Estimates are provided on a best efforts basis.
SIZING THE MARKET
The IA estimates the size of the UK pension market to 
be £3.8 trillion at the end of December 2019. The total 
includes all assets in DB and DC / personal pensions, 
as well as those assets in some form of drawdown 
arrangement, plus assets backing annuities, which 
will be part of insurance company balance sheets. 
IA members firms are therefore managing indirectly 
far more than the £2.6 trillion connected to pension 
scheme business.
This year’s total figure of £3.8 trillion is not directly 
comparable to previous years as the overview this 
year includes data from new sources, enabling us to 
include an estimate for assets in SIPPs in the individual 
personal pensions estimate, and to provide an 
improved estimate for assets backing annuities.
Figure 12 provides an estimate of how these assets are 
broken down across the different scheme types.
DB (funded) assets continue to be the dominant 
presence in the UK pensions market. However, the 
policy of automatic enrolment introduced by the UK 
Government in 2012 has had a major positive impact 
on pension saving. Although assets in DC schemes 
remain lower than those in DB arrangements, the 
number of savers into DC schemes exceeds those 
actively saving into DB schemes. Most private sector 
DB schemes are now closed to new members, with UK 
DB provision now mainly a public sector phenomenon. 
Therefore, when only private sector pension saving is 
taken into account the shift from DB to DC is even more 
evident (see Chart 22).
Pension participation increased steadily as automatic 
enrolment was rolled out. Since the completion of 
the initial rollout in 2017 participation has stabilised 
and there is no indication thus far that employees 
have subsequently opted out of occupational pension 
saving in significant numbers. However, the lockdown 
of 2020 has placed significant pressure on employees 
in many sectors, the full impact of which will not be 
known until the government furlough scheme ends in 
October. Many thousands of employees are likely to 
lose their jobs, which may lead people to re-consider 
their ability to save for their retirement at the expense 
of their standard of living today. If this happens, it has 
the potential to interrupt the success of automatic 
enrolment, at least in the short term (see discussion on 
pages 60 to 63).

THE INVESTMENT ASSOCIATION
60
CHART 22: PENSION PARTICIPATION FOR PRIVATE SECTOR 
JOBS
2011       2012        2013       2014       2015       2016        2017       2018       2019
Contract-based DC               Trust-based DC                 DB                      Any pension
80%
70%
60%
50%
40%
30%
20%
10%
0%
Source: ONS
Many of these new savers have been enrolled into 
master trust arrangements. A recent survey of pension 
providers showed that 81% of DC scheme members are 
in a master trust arrangement.17
CHART 23: DC MEMBERS BY SCHEME TYPE
Master Trust 81% 
Stakeholder 1% 
Personal pension 5% 
Group SIPP 9% 
GPP 4% 
Source: Pensions Policy Institute 
17  PPI DC Assets Allocation Survey 2019, Pensions Policy Institute.  
Note some members may have pots in more than one scheme 
type. A master trust is an occupational private sector DC pension 
scheme that is used by multiple employers that are unconnected 
with each other.
The immediate impact of Covid-19 on DC pension 
schemes in the UK came via the volatility in 
markets following the spread of the virus around 
the world and the subsequent lockdowns imposed 
by governments. By summer 2020, markets, and 
scheme portfolios, had recovered to a significant 
extent, notwithstanding the continued depressed 
levels of economic activity. 
However, given the uncertainty around the future 
shape of the economic recovery and its impact on 
the economy’s structure, the medium to long term 
impact of Covid-19 on the DC pensions sector 
remains uncertain. There are clearly significant 
risks, particularly in areas such as contribution 
levels if economic conditions continue to be 
stressed, affecting both employers and employees.
We asked a number of firms for their views on 
the impact of the pandemic on the DC pensions 
sector as well as the implications for investment 
managers serving DC pension schemes.
ACCUMULATION: SAVINGS AND INVESTMENT 
BEHAVIOUR
In the short term, pension contributions had held 
up well, as Government furlough schemes had 
covered these as part of the financial support 
offered to employers. However, any rise in 
unemployment as these schemes were withdrawn 
would likely result in an associated fall in pension 
contributions. 
Some pension providers had reported a short- 
term lowering of members’ own contributions but 
this was not a widespread phenomenon. One area 
of concern was the possibility for members to be 
given limited early access to their pension pots to 
help mitigate the loss or reduction of income from 
earnings in the short term. US 401(k) DC plans 
already allow for early withdrawal under some 
circumstances and governments in Australia and 
Chile had allowed limited early withdrawals in 
response to the impact of Covid-19 on peoples’ 
finances. 
THE IMPACT OF COVID-19 ON THE 
DC PENSIONS SECTOR

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While such a policy may clearly be beneficial in the 
short term, it could have significant effects on future 
retirement income if saving was not subsequently 
increased later on. Firms expected that the 
experience of Covid-19 may result in more pension 
schemes seeking to follow the NEST ‘sidecar’ 
approach and incorporate a ring-fenced liquid 
savings pot for short-term/emergency access. 
With respect to the impact on peoples’ investments 
and associated behavioural responses, there was 
no evidence of panicked investment behaviour, with 
most people simply doing nothing and staying in 
their existing investment strategies. 
“Contributions fell because of a loss of 
income or redundancy but there was no 
mass-switching of investments in response 
to losses. Because asset value losses have 
been so short lived, people don’t feel that 
impacted.” 
“People are more likely to be inert 
because they have so many other problems 
to deal with – the last thing they will do 
is make a big call in markets. Inertia will 
reign.” 
INCOME IN RETIREMENT: MEMBER BEHAVIOUR 
AND INVESTMENT STRATEGY
The impact on people close to, or in retirement was 
more significant. Some providers had reported an 
increase in the rate of cash that people over 55 were 
taking. 
For people seeking an income from their pension, 
the impact of the pandemic on markets was 
challenging: central bank actions to support 
economies suggested that the low interest rate 
environment was set to continue for the foreseeable 
future. Annuities, which already looked expensive, 
would become even more so.
On the other hand, investment strategies that rely 
on income generation would find it very tough, given 
the falls in dividends and rises in corporate debt 
defaults that were already apparent. Although this 
did provide an opportunity to design income-focused 
products that did not rely as heavily on dividend and 
coupon payments. The crisis may also lead to a re-
thinking of asset allocation in drawdown strategies, 
with a greater focus on the degree of risk taken. 
Firms also worried about whether people able 
to access their pensions might perceive pension 
products as overly risky in the current environment 
in comparison to savings accounts, causing them 
to cash out their pensions and put the money into 
savings accounts. 
“Our research has picked up trepidation 
and concern about approaching the 
retirement decision and the current 
situation may make that worse. 
Savings accounts win out under those 
circumstances because people understand 
them.”

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62
HOW WILL THE CRISIS AFFECT EXISTING TRENDS 
IN DC INVESTMENT?
The crisis is also relevant for the further evolution 
of two trends that were already prevalent in DC 
investment in recent years: ESG integration into DC 
defaults and, increasingly, the role of illiquid assets.
(i) Impact of Covid-19 on responsible investment
The focus on responsible investment is widespread 
throughout the investment chain and the DC market 
is no exception. However, while there is interest from 
savers in the pure retail funds and retail pensions 
markets, demand in workplace DC is being driven 
largely – for now at least - by trustees, pension 
providers and investment consultants. 
The institutionally-led focus on responsible 
investment in DC is likely to be due to regulation that 
has required trustees and providers to demonstrate 
how they are taking account of financially material 
ESG factors in their investment strategies, with 
a particular focus on climate change. These 
requirements and the interest they have generated 
predate the onset of the pandemic, but there is 
evidence that the pandemic has spurred additional 
interest. One of the notable aspects of this is an 
emerging focus on different aspects of the ‘E’, ‘S’ and 
‘G’ of ESG, particularly the ‘S’. 
“At the institutional and trustee level 
there has been more focus on good 
governance and thinking about how well-
managed companies are going to deliver 
better value for members over the long 
term . The impact of coronavirus has been 
that social responsibility is starting to 
come into the conversation a bit more.” 
“We have seen a pickup in interest 
from clients in UK social investment. 
Particularly with regard to supporting the 
communities most impacted by Covid-19. 
That’s been a much stronger theme than 
climate change.” 
Over time, firms expect there to be an increasingly 
bottom-up approach feeding into trustee decision-
making on responsible investment, with views from 
members and corporates being taken into account, 
with some firms already noting that they had observed 
this in some large schemes they had worked with.
“With some of the very large corporate 
schemes, members are getting a bit 
more vocal in going to their pension 
departments and the trustees and asking 
for more clarity on what is available from a 
sustainability perspective.” 
“When we’ve seen schemes who have 
made big decisions in allocating to 
sustainable strategies, the trustee makes 
the decision but the corporate has an 
input. The schemes that have embraced 
this fully have the corporate standing 
somewhere quite close to the trustee. 
Whether that is member driven or aligning 
it with the corporate’s CSR, is less clear.” 
The cause of sustainable investment products had 
been further helped through the first phase of the 
crisis by the fact that such strategies had done 
well, although it was acknowledged that strong 
conclusions should not be drawn from this and that 
in general both the investment industry and schemes 
had to be better in setting out the investment case for 
ESG strategies. More generally, firms were expecting 
a greater focus from clients on the reasons for any 
outperformance of ESG strategies.
“People buy performance and generally 
the more ESG friendly your strategy 
has been, the better you’ve done – 
largely because you tend to overweight 
health care and tech stocks which have 
done well.”

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“We have to explain why saving 
the environment is going to be good 
financially and why it is a good investment 
opportunity. People have to step back and 
say what is it we’re trying to achieve and 
what is our belief that will give us the best 
outcome.” 
“There is going to be an increased 
focus on reporting. How does what we 
are doing translate to performance, 
attribution analysis and if there is tilting in 
portfolios?” 
(ii) The role of illiquid assets in DC
The capital market and broader economic 
experience of 2020 has various ramifications for 
the debate about the role of illiquid investments. 
From an operational perspective, firms felt that 
some of the market events – notably, property funds 
suspending due to valuation uncertainty and some 
asset classes becoming less liquid due to a lack of 
buyers – highlighted more fundamental challenges 
with the DC model of daily pricing and liquidity.
“People didn’t expect liquidity in 
investment grade corporate bonds to 
evaporate overnight at the end of March. 
Some pension schemes will have high 
yield exposure in their growth strategies 
and liquidity disappeared for a few weeks. 
It shines the light on this obsession 
with daily liquidity in DC and it’s not just 
property.” 
“You’ve seen DB schemes take advantage 
of the pricing coming out of high yield and 
other parts of the credit market. DC can’t 
do that, they’re stuck with public markets 
that are very volatile and find it challenging 
to manage that volatility.” 
 The issue of illiquids links to the broader question 
of the role that pension schemes and investment 
managers could play in the Covid-19 recovery, 
particularly in areas such as infrastructure and 
private markets, alongside recapitalisation activity 
in public markets. We have already explored some of 
these issues in Chapter Two of this report, including 
the role that a new Long-Term Asset Fund could play. 
Firms close to the DC market were also cautious 
about the different fiduciary responsibilities through 
the delivery chain and the importance of avoiding 
any formal direction from the Government to 
pension schemes in that area. 
“It’s difficult to predict if there will be a 
sea change in the Government’s view on 
what pension schemes and their asset 
managers should be doing with pension 
assets. There will be the message that 
‘supporting the British economy is what 
pension schemes should be doing’. We’ve 
seen that mentioned in the context of 
infrastructure investment for a long time.” 
Indeed, firms felt that the trends in geographic 
allocation were moving in the opposite direction, 
with most pension scheme asset allocation models 
continuing to globalise, which suggested that the 
UK economy would also benefit from overseas 
pensions schemes continuing to look for investment 
opportunities.

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64
TRENDS IN THE THIRD PARTY 
INSTITUTIONAL MARKET
Full details of the asset allocation and investment 
strategy for the entire institutional market are 
available in Appendix 2 of this report. The remainder 
of this chapter looks more closely at IA data from the 
institutional market that is available to third parties, 
that is, excluding mandates managed in-house by 
insurance parent groups and occupational pension 
schemes, as at the end of 2019.
Once in-house mandates are excluded from the 
institutional data, assets under management stand 
at £3.4 trillion, unchanged from 2018, but above the 
£3.1 trillion see in 2017. 
Pension funds become even more dominant (see 
Chart 24), representing almost three quarters of third 
party assets, with the remaining insurance assets 
representing only 12% of the market.
CHART 24: THIRD PARTY UK INSTITUTIONAL CLIENT 
MARKET BY CLIENT TYPE
Pensions 71.9% 
Other 4.7% 
Sub-advisory 4.2% 
Corporate 3.3% 
Non-proﬁt 1.1% 
Public sector 0.9% 
Third party insurance 
13.8% 
MANDATE BREAKDOWN
Chart 25 breaks the institutional market down into 
three categories of mandate:
• Single-asset, or ‘specialist’ mandates, which focus 
on a specific asset class or geographical region. 
Specialist mandates remain the most popular form 
of investment among institutional investors, with 
45% managed on this basis.
• Multi-asset, or ‘balanced’ mandates, which would 
cover a number of asset classes and regions. These 
account for 14% of total mandates. Stripping out the 
LDI mandates below, the balance between specialist 
and multi-asset is 76% single asset versus 24% 
multi-asset. 
• LDI mandates, which are specifically designed to 
help clients meet future liabilities now represent 
41% of assets managed for third party clients. These 
mandates frequently make greater use of derivative 
instruments and are therefore included on the basis 
of the notional value of liabilities hedged, rather than 
the value of physical assets held in the portfolio. An 
estimated £1.4 trillion is now being hedged in LDI 
mandates.
CHART 25: UK THIRD PARTY INSTITUTIONAL CLIENT 
MANDATES INCLUDING LDI
LDI 41% 
Single 45% 
Multi 14%

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Assets under management for LDI mandates have 
increased from £400 billion in 2011 to £1,400 billion in 
2019. LDI has seen faster growth than other types of 
mandate as DB pension schemes have sought to match 
their future liabilities. Regulatory changes around the 
DB funding regime in the UK have reinforced this shift 
towards liability management and will likely continue 
to grow in the near future. 
CHART 26: NOTIONAL VALUE OF LDI (2011-2019)
Total Notional Liabilities Hedged 
1,600
1,400
1,200
1,000
800
600
400
200
0
2011       2012        2013        2014       2015        2016        2017       2018       2019
£bn
Source: KPMG LDI Survey, IA 
Although DB pension schemes remain a significant 
proportion of the institutional market, the fact that 
they have very specific requirements means that their 
LDI allocations can mask trends that might otherwise 
be observed in the market. For that reason we exclude 
the value of LDI mandates from the asset allocation 
analysis on pages 65 to 69 and focus purely on whether 
clients are favouring multi-asset or specialist solutions 
other than explicit liability management. 
Chart 27 indicates that the preference for specialist 
mandates continues to be high overall but varies 
significantly depending on the type of client. Multi 
asset mandates are most likely to be used by third 
party insurance, whereas the largest client type, 
pension funds, remains heavily dependent on single 
asset specialist mandates. As the definition of pension 
funds in this report reflects mainly defined benefit, 
and larger defined contribution schemes (e.g. master 
trusts) it is not surprising to see this as they are more 
likely to have both the level of assets and the expertise 
to appoint specialist managers.
CHART 27: UK THIRD PARTY INSTITUTIONAL CLIENT 
MANDATES: MULTI-ASSET VS. SPECIALIST  
Single            Multi 
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Pension     Public         Non-     Corporate     Sub-          Third          Other          Total
  funds        sector        proﬁt                           advisory       party
                                                                                                       insurance
Chart 28 shows that the trend towards multi-asset 
investment in recent years seems to have stalled as the 
level of assets managed in multi-asset strategies at 
the end of 2019 was 24%, slightly down on the previous 
year. This suggests that the possibility raised in 
previous reports, that increased contributions through 
the automatic enrolment scheme would lead to an 
increase in multi-asset strategies, reflecting the nature 
of default investment strategies, does not seem to be 
coming to pass.   
CHART 28: UK THIRD PARTY INSTITUTIONAL CLIENT 
MANDATES: MULTI-ASSET VS. SPECIALIST (2011-2019)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2011       2012        2013       2014        2015       2016        2017       2018        2019
Single           Multi

THE INVESTMENT ASSOCIATION
66
The major reason for this is likely to be that there 
are a range of approaches to asset allocation being 
used across the pensions industry, which mean that 
pension schemes and/or consultants will frequently be 
controlling the allocation directly, building strategies 
based on segregated mandates and/or component 
funds. Investment managers offering multi-asset 
strategies will then be competing for a share of this 
market. Chart 29 suggests that the use of multi-asset 
funds remains limited in default strategies.
CHART 29: DC ASSET ALLOCATION, 30 YEARS PRIOR TO 
RETIREMENT AND AT RETIREMENT18
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Equities              DGF            Balanced            Bonds               Cash                Other
                                                         funds
30 yrs to retirement                     At retirement 
Master Trusts 
GPPs 
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Equities              DGF            Balanced            Bonds               Cash                Other
                                                         funds
30 yrs to retirement                     At retirement 
Source: Willis Towers Watson FTSE 350 DC pension survey
INVESTMENT TRENDS WITHIN SPECIALIST 
MANDATES
Chart 30 shows that fixed income continued to account 
for almost 40% of total assets in specialist mandates. 
Cash increased to 10%. Looking over the past decade, 
it is difficult to see marked year on year trends, but 
broadly equity mandates have tended to fall as a 
proportion of overall mandates.
CHART 30: SPECIALIST MANDATE BREAKDOWN BY ASSET 
CLASS (2011-2019)
Equities                Fixed income             Cash                 Property             Other
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2011        2012        2013        2014        2015        2016        2017         2018        2019
Chart 31 shows that different types of institutional 
client have very distinct requirements and the headline 
split between single asset classes masks a wide 
variation in the type of mandate required by each 
client type. Insurance companies for example have 
particularly high allocations to fixed income mandates 
(58%). Pension funds also have higher than average 
fixed income allocations (42%), led by particularly high 
allocations among corporate pension schemes (46%).
18 Asset allocation in DC varies by age cohort, reflecting the principle that members’ capacity to bear investment risk reduces as they age. So we 
tend to see investment risk in DC strategies reduced over time through shifts out of equities and into bonds and other diversifiers.

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CHART 31: SPECIALIST MANDATE BREAKDOWN BY ASSET 
CLASS
Equities                Fixed income             Cash                 Property             Other
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0% Pension     Public         Non-     Corporate     Sub-          Third          Other          Total
  funds        sector        proﬁt                           advisory       party
                                                                                                       insurance
Since the mid-1990s, the asset allocation of DB 
schemes has shifted significantly as they have moved 
away from using traditional scheme-specific asset 
allocation benchmarks to strategies which more closely 
match their assets to their liabilities and manage their 
deficit volatility, a trend that has been encouraged by 
evolving regulation of DB scheme funding. 
This Survey has documented this change and recent 
years indicate an interesting shift. The proportion of 
assets held in cash and deposits has turned negative. 
This is likely to be related to investments such as 
swaps and repurchase agreements.
Over the longer term, compared to 25 years ago, a 
typical DB scheme is now likely to hold a much smaller 
proportion in equities (just under a quarter), which 
itself includes more overseas than domestic equities, 
as well as more private equity. The allocation to UK 
equities has fallen particularly dramatically over the 
last 25 years to just 4% of the overall asset allocation 
in 2019.
Over the same period pension funds have adopted a 
considerably larger allocation to fixed income assets 
(63%) and have an increasing allocation to alternative 
assets (13% compared with almost nothing in the mid-
1990s).
CHART 32: UK DB PENSION FUND ASSET ALLOCATION 
(1993-2019)19
UK equities                              Non-UK equities                          Private equity
Fixed Income                          Cash                                                   Property
Other
100
80
60
40
20
0
-20
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
%
Source: UBS, PPF/TPR Purple Book
In contrast to DB schemes, Chart 32 showed that the 
asset allocation of DC schemes has a much higher 
allocation to equities alongside a significant change in 
asset allocation between accumulation phase and at 
retirement. 
As with DC schemes, the LGPS has a rather different 
membership makeup than other DB schemes. As a 
public sector scheme, it is one of the few DB schemes 
that remains open to new members. Consequently, 
scheme membership is comparatively less mature 
than closed corporate DB schemes and new members 
continue to contribute and build up entitlements, 
meaning the scheme has a longer investment horizon 
than closed DB schemes. The LGPS funds also function 
within a different regulatory framework to corporate 
schemes and are thus subject to less pressure 
to implement de-risking investment strategies. 
Consequently, they can maintain a higher allocation 
to return-seeking strategies, which have higher equity 
allocations. 
19 In order to more clearly illustrate the shift to negative cash holdings the format of this chart is different to that used in past reports.

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68
Chart 33 shows the change in asset allocation of 
pension schemes in aggregate. There is a wide variation 
depending on the type of pension scheme in question. 
As in previous years the LGPS has a higher allocation 
to equities than corporate pension schemes (63% vs. 
33%).
CHART 33: SPECIALIST MANDATE BREAKDOWN BY ASSET 
CLASS AMONG UK PENSION FUNDS
Equities                Fixed income             Cash                 Property             Other
Corporate
pension
funds
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
LGPS
Other pension
funds
All pension
funds
ACTIVE VS. INDEXING
Just over two thirds of institutional client assets (69%) 
were managed by IA members on an active basis, 
almost unchanged from 2018. Of the different client 
groups, pension scheme and sub-advisory were the 
most significant users of indexing.
CHART 34: ACTIVE AND INDEX THIRD PARTY MANDATES 
BY CLIENT TYPE (SAMPLE-ADJUSTED)
Active 
      Passive                             
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Pension      Public        Non-    Corporate     Sub-          Third         Other         Total
  Funds        Sector      proﬁt                           advisory      party 
                                                                                                      Insurance
AT THE END OF 2019   
69%  
OF UK INSTITUTIONAL 
CLIENT ASSETS WERE 
ACTIVELY MANAGED

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SEGREGATED VS. POOLED
Chart 35 shows that segregated mandates represented 
approaching two thirds (64%) of assets managed for 
third party institutional mandates at the end of 2019. 
Almost all mandates managed for third party insurance 
were managed on a segregated basis.
CHART 35: SEGREGATED AND POOLED MANDATES BY 
INSTITUTIONAL CLIENT TYPE
Segregated               Pooled                             
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Pension     Public         Non-    Corporate     Sub-         Third         Other         Total
  Funds       Sector       proﬁt                           advisory     Party 
                                                                                                     Insurance
The proportion of mandates managed on a segregated 
basis has been relatively stable since 2015, with little 
year on year variation.
Among pension schemes corporate pension funds are 
significantly more likely to be managed on a segregated 
basis than any other type of scheme (65%).
CHART 36: SEGREGATED AND POOLED MANDATES AMONG 
THIRD PARTY PENSION FUNDS
Segregated                Pooled                              
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Corporate pension               LGPS                      Other pension                All pension
            funds                                                                         funds                              funds
SEGREGATED
MANDATES REPRESENTED
64%  
OF THIRD PARTY 
INSTITUTIONAL ASSETS 
AT THE END OF 
2019

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70
5 RETAIL FUND MARKET 
UK INVESTOR FUNDS UNDER MANAGEMENT
>>  By the end of 2019, UK investor funds under 
management (FUM) in UK and overseas domiciled 
funds had reached a record £1.31 trillion.  
>>  Funds under management had recovered to £1.28 
trillion by June 2020 despite a 14% fall in March.
COVID-19 AND THE CHANGING PATTERN 
OF RETAIL FUND SALES
>>  UK investors reacted strongly to extreme levels of 
market turbulence through 2020. The March 2020 
outflow of £9.7 billion from UK retail funds was the 
highest ever, largely dominated (76%) by outflows 
from fixed income funds. The £1.12 billion outflow 
from equities was significantly lower given that the 
steep decline in equity valuations may have made 
it unattractive for investors to sell out of them in 
March.
>>  Sales rallied strongly in Q2 2020 at £11.2 billion 
taking net retail sales for the first half of 2020 to 
£8.6 billion. By way of comparison, first half net 
retail sales in 2019 were £3.5 billion in a year of 
fairly weak total sales (£9.8 billion), which followed 
an even weaker 2018 (£7.7 billion).  
>>  The last five years have seen unusually volatile 
flow amidst rising domestic political and economic 
uncertainty.
EROSION OF HOME BIAS IN EQUITIES
>>  Allocations to UK equity funds have declined 
substantially as a proportion of total UK investor 
FUM in the last 15 years falling from 39% of FUM in 
2005 to 14% by June 2020. 
>>  Since the Brexit referendum was announced in 
January 2016, up until June 2020, UK equity funds 
have seen heavy outflows of £12.7 billion.
>>  Three factors have contributed to the decline:
       – A more uncertain economic outlook for the UK as 
a result of the Brexit referendum
       – Weaker total returns from the FTSE relative to 
global capital markets and a dependence on 
dividends to boost total returns
       – Relatively low capital growth over a sustained 
period and a low weighting of the FTSE All-Share 
to higher growth industry sectors
INVESTOR INTEREST IN INDEXING FUNDS 
IS INCREASING
>>  Indexing funds under management reached £230 
billion at the end of 2019, up 26% year on year from 
2018. In June 2020, FUM remained at £230 billion.
>>  Growth has accelerated post-2012 when indexing 
funds accounted for just 8% of FUM. Total funds in 
indexing funds accounted for 18% of FUM in June 
2020.
>>  Sales to indexing funds have remained resilient 
during periods when capital markets were 
experiencing sharp falls. In March 2020, indexing 
funds saw positive net sales of £467 million against 
an outflow of £10.1 billion from active funds.
KEY FINDINGS

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RESPONSIBLE AND SUSTAINABLE FUNDS 
>>  The FUM in responsible investment funds rose by 
89% from January 2019 to June 2020. FUM reached 
a high of £33 billion in June 2020 as asset prices 
recovered and inflows continued.
>>  Sales to RI funds have weathered the market shock 
of 2020: net retail sales between January 2019 and 
June 2020 were £7.0 billion with net inflows each 
month over this period. This includes March 2020 
where net retail sales remained positive, albeit 
depressed, at £124 million. 
>>  In the first six months of 2020, net sales to 
responsible investment funds were four times 
higher than in H1 2019.
RETAIL FUND DISTRIBUTION  
>>  UK fund platforms remain the dominant retail 
distribution channel in 2019 with a 49% share of 
total gross sales. Sales through platforms rose by 
17% year on year to reach £127 billion.
>>  Platforms were also the largest channel for net 
sales in 2019 despite a £2 billion decrease to £10.9 
billion. The ‘Other UK Intermediaries including IFAs’ 
channel saw net sales of £3 billion, up from £0.2 
billion in 2018.
>>  The first half of 2020 has seen a shift in the 
patterns in distribution. Flows through the ‘Other 
UK Intermediaries including IFAs’ channel have been 
strong with particularly strong sales in the first 
quarter during a period when other channels saw 
flat sales or outflows. 
       – UK Fund Platforms saw higher outflows from 
general investment accounts in 2020, whereas 
funds wrapped by ISAs or pensions were more 
resilient on platform. Outflows from unwrapped 
accounts for the first half of 2020 were at £903 
million due to heavy outflows in the first quarter. 
NET RETAIL 
SALES TO RI FUNDS WERE
4X HIGHER
IN H1 2020 THAN 
IN H1 2019

72
Our analysis of the UK investment fund market is based 
on proprietary IA sales data looking at UK investor 
behaviour, particularly retail.20 This data provides 
insight for the first half of 2020, offering more up-to-
date analysis than the total assets under management 
data at investment management industry level. 
Chapter 5 looks in detail at both recent developments 
in UK retail fund investor behaviour and longer-term 
trends in the UK funds industry.
UK INVESTOR FUNDS UNDER 
MANAGEMENT
By the end of 2019, UK investor funds under 
management (FUM) in UK and overseas domiciled 
funds had reached a record £1.31 trillion, up from 
£1.15 trillion at year-end 2018 and a 14% increase year 
on year (see Chart 37). Although FUM fell at the end of 
2018 as a result of a sharp reversal in global capital 
markets, market returns rebounded over the course of 
2019, with asset appreciation driving the 14% increase 
in FUM.
Through Q1 2020, the UK retail fund market faced 
significant headwinds as investors grappled with the 
implications of Covid-19 for investment returns. Whilst 
the coronavirus pandemic is not a financial crisis in 
origin, the measures implemented to contain the virus, 
including the locking down of populations globally, had 
a swift and dramatic impact on capital market returns 
in March: the FTSE All-Share lost 28% of its value 
between 4-23 March, a pattern that was replicated 
across the global equity markets. 
Between December 2019 and March 2020, the gains in 
FUM made during 2019 were therefore wiped out: 
FUM declined by 14% to £1.13 trillion as a result 
of March’s steep market falls. However, as markets 
recovered, so funds under management have since 
risen to £1.28 trillion as at June 2020, a decline of 2% 
from December 2019.
CHART 37: TOTAL INDUSTRY FUNDS UNDER MANAGEMENT 
(2004- JUNE 2020) 
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
 2014
2015
2016
2017
2018
2019
June 2020
1,400
1,200
1,000
800
600
400
200
0
£bn
Looking over the past 15 years, despite strong growth 
in overall sales (total £294.3 billion), asset appreciation 
and depreciation have been the most significant 
driver of total FUM. Chart 38 particularly illustrates 
the impact of market movements on funds under 
management in 2008, as markets were affected by 
the GFC and again by major turbulence in 2018. Even 
at moments of acute stress when the industry sees 
significant outflows, it is market movement that 
overwhelmingly accounts for the change in overall 
FUM. 
CHART 38: DRIVERS OF INDUSTRY GROWTH (1980 TO 
2020 JUNE)
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
June 2020
Industry funds under management                 Net Sales 
Asset appreciation 
1,400
1,200
1,000
800
600
400
200
0
£bn
STRONG 
EQUITY 
MARKETS
DOT.COM
CRISIS
CREDIT 
CRISIS
RECORD 
SALES
RECOVERY
COVID 19
20 IA data show retail and institutional funds under management for 
UK investors in UK domiciled and overseas domiciled funds but 
from 2012 does not include overseas investors in UK domiciled 
funds. Prior to 2012 the data represents all investors in UK 
domiciled funds. Data on overseas investors in UK domiciled funds 
is shown in Chart 68.

73
INVESTMENT MANAGEMENT SURVEY 2019-20 | RETAIL FUND MARKET 
5
UK INVESTOR FUM BY ASSET CLASS 
As we explore in later sections of this chapter, a major 
historic trend within the overall asset mix is the decline 
in UK equities as a proportion of total FUM since 2004 
– falling from 39% to 14% in June 2020 (see Chart 39). 
In contrast, overseas equities accounted for 36% of 
FUM in June 2020, an increase of 4 percentage points 
from 2005. This rise aligns with the wider increase in 
overseas equities as a proportion of total assets under 
management (See Chapter 3) as home bias continues 
to erode. That erosion is much more pronounced in 
parts of the institutional market, notably DB pension 
schemes, than in UK retail. 
The overall proportion of funds allocated to equities 
has also fallen, again a trend seen in the institutional 
market. This sees funds invested in fixed income now 
representing 20% of FUM in June 2020, compared with 
15% in 2005. Mixed asset as a proportion of FUM is 
now 16% against 12% in 2005. 
CHART 39: FUM BY ASSET CLASS (2004-2020 JUNE)
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
June 2020
UK Equity                       Overseas Equity                     Fixed Income
Mixed Asset                  Other 
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
The highest increase as a proportion of FUM over the 
last 15 years is seen outside the main fund categories 
(equities, fixed income and mixed assets). This takes 
the ‘Other’ category to 14% of FUM in June 2020: a 
substantial increase from 2% in 2005. This shift has 
particularly been driven by the rise in preference for 
outcome-oriented funds, notably targeted absolute 
return and volatility-managed funds, which now 
account for a combined total of 7% of total FUM (see 
Chart 40).
CHART 40: UK INVESTOR FUM BY ASSET/FUND SECTOR 
Other 1% 
Overseas equity
36% 
UK equity 17% 
Fixed income 
19% 
Mixed asset
16% 
Other 
5% 
Property 2% 
Money markets 2% 
Targeted
absolute 
return
4% 
Volatility
Managed 3% 
COVID-19 AND CHANGING PATTERNS OF 
RETAIL FUND SALES 
After a comparatively uneventful beginning to the 
year, total outflows in March 2020 reached £9.7 billion 
overall, the highest ever seen in a month, the next 
highest being £2.5 billion in June 2016 following the 
Brexit referendum. This has been offset to a significant 
extent by a return to inflows in April totalling £11.2 
billion through to June. Overall net retail sales for 
the first half of 2020 were £8.6 billion. By way of 
comparison, first half net retail sales in 2019 were £3.5 
billion in a year of fairly weak total sales (£9.8 billion), 
which followed an even weaker 2018 (£7.7 billion). As 
we show later in this section, the last five years have 
seen unusually volatile flow amidst rising domestic 
political and economic uncertainty.

THE INVESTMENT ASSOCIATION
74
As Chart 42 shows, different patterns can be observed 
across different regions.
• Global. Despite the overall restraint in equity sales, 
global equities saw large outflows of £1.33 billion 
in March. Sales to global funds have also enjoyed 
the strongest sales rebound in Q2 2020, as assets 
totalling £2.4 billion flooded back over the period.
• North America. Outflows from North American 
equities were £256 million in March. Net retail sales 
picked up again in May, taking inflows in the second 
quarter to £1.0 billion. The S&P 500, the major US 
index, gained 36% between 23 March and 29 June 
2020: this compares with a 23% gain for the FTSE 
100 over the same period. 
• Europe. European equities have seen eight 
consecutive quarterly outflows up to Q2 2020: the 
highest outflows over this period coming in Q1 2019 
of £1.3 billion. In March, £239 million flowed out and 
May saw higher outflows of £500 million despite 
rebounding returns in the European capital markets. 
The ECB has been less decisive than other Central 
Banks in using the monetary policy levers at its 
disposal. 
• Asia. Asian countries faced earlier restrictions in 
their efforts to contain the virus and whilst sales 
to Asian equities have been relatively volatile 
month on month through 2020, outflows were 
more concentrated in Q1: March’s outflow of £179 
million pushed Asian equities to net retail sales of 
-£182 million in the first quarter. This is the highest 
quarterly outflow since Q1 2017, but significantly 
less than the highest outflow of the last ten years of 
-£611 million in Q3 2015. Q2 inflows reached £247 
million as re-opening after strict lockdown measures 
in Asian countries preceded Europe and North 
America.
• UK. Outflows from all the other major geographic 
locations in March were offset by a £747 million 
inflow across UK equities. As equity markets around 
the world, including the FTSE, lost 20-30% of their 
value reaching a low on 23 March, the net retail 
inflow to the UK All Companies sector of £965 million 
was the second highest on record. One explanation 
for this may be that some investors were prepared 
to allocate more capital to UK equities at relatively 
cheap valuations in March. These investors were 
banking on a steep recovery in performance. From 
CHART 41: MONTHLY TOTAL NET RETAIL SALES – 2019 TO 
JUNE 2020 
6
4
2
0
-2
-4
-6
-8
-10
-12
£bn
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
EQUITY FLOWS 
Equity flows were very volatile through 2019, with 
significant outflows in the summer months. In March 
2020, in spite of plummeting capital returns in the 
global equity markets, the £1.12 billion outflow was 
significantly lower both than fixed income and the 
monthly equity outflows in August and September 
2019. The steep decline in equity valuations may have 
made it unattractive for investors to sell out of them in 
March at the bottom of the market.
CHART 42: NET RETAIL SALES BY ASSET CLASSES 
(2019 – JUNE 2020)
Equity                  Fixed Income                   Mixed Asset                Money Markets
Property             Target Absolute Return  
Others excl. Target Absolute Return  
6
4
2
0
-2
-4
-6
-8
-10
-12
£bn
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20

75
INVESTMENT MANAGEMENT SURVEY 2019-20 | RETAIL FUND MARKET 
5
March through to May inflows totalled £2.2 billion. 
There are signs in June that investors have started 
to bank these gains as £1.1 billion flowed out of 
UK equities. An element of greater familiarity with 
companies listed in or deriving significant revenues 
from the UK may have guided some retail investors to 
risk allocating more capital to UK equities in March: 
we did not see UK investors taking this approach for 
global and US equities.
CHART 43: NET RETAIL SALES BY EQUITY REGION 
(2019 - JUNE 2020)
3
2
1
0
-1
-2
-3
£bn
Asia                                          Europe                               Global                                 Japan
North America                    UK                 
Jan 19
Feb 19
Mar 19
Apr 19
May 19
Jun 19
Jul 19
Aug 19
Sep 19
Oct 19
Nov 19
Dec 19
Jan 20
Feb 20
Mar 20
Apr 20
May 20
Jun 20
FIXED INCOME FLOWS 
Through 2019, net sales to fixed income had recovered 
substantially after outflows in Q4 2018 and the total 
over the year reached £6.7 billion. As we approached 
the height of the Covid-19 market crisis in Spring 2020, 
one might have expected that investors would avoid 
selling out of assets in fixed income funds, an asset 
class that is classically less risky for investors than 
equities. This was not the case:
• Outflows of £7.4 billion from fixed income funds in 
March accounted for 76% of the total retail outflow. 
• All nine fixed income sectors recorded their highest 
ever outflow as a proportion of sector FUM in March.  
• Some 80% of fixed income funds recorded net 
outflows in March, and this is by far the highest 
proportion of funds seeing outflows in the main 
asset classes in current IA data (which goes back to 
2002).
The largest fixed income net outflows in March were 
across funds in the £ Corporate, £ Strategic and the 
Global Bond sectors, the three largest fixed income 
sectors by FUM. There were also large-scale outflows 
from the High Yield sector which invests in sterling 
non-investment grade debt with the promise of higher 
yields and is therefore more vulnerable to credit 
defaults. However, there were outflows across all the 
fixed income sectors to varying degrees. 
Assets have flowed back to fixed income funds in Q2, 
recouping 65% of March 2020’s £7.4 billion outflow by 
June 2020. Whilst sales to bond funds have rebounded, 
the spectre of investment grade bond downgrades 
remains. Funds investing in this type of debt would 
have to adjust allocations to avoid too great an 
exposure to non-investment grade debt if the pace of 
downgrades accelerate. Globally, the strength of the 
dollar has also affected emerging market debt issuers 
as debt is often dollar denominated making it tougher 
to pay down when the dollar is strong.
CHART 44: FIXED INCOME, MONTHLY NET RETAIL SALES 
BY SECTOR (2019 - JUNE 2020)
4
2
0
-2
-4
-6
-8
£bn
£ Corporate Bond                        £ High Yield                      £ Strategic Bond                         
Global Bonds                     Global Emerging Markets Bond
UK Gilts                       Other               
Jan 19
Feb 19
Mar 19
Apr 19
May 19
Jun 19
Jul 19
Aug 19
Sep 19
Oct 19
Nov 19
Dec 19
Jan 20
Feb 20
Mar 20
Apr 20
May 20
June 20

THE INVESTMENT ASSOCIATION
76
We see three key drivers of the heavy fixed income 
outflows: 
• Re-balancing portfolios as equity valuations fell: 
Equity valuations dropped 20% -30% over a short 
period of time, reaching a low on 23 March. Portfolios 
with a 60 /40 weighting to bonds and equities would 
have moved significantly out of alignment, leaving 
them with a much higher weighting to bonds. The 
prospect of selling down equities when valuations 
are low is unappealing. In particular, discretionary 
managers looked to balance portfolios in the short-
term. Investors selling out of fixed income for re-
balancing purposes appear to have sold down more 
liquid fixed income funds first, and this is part of the 
explanation for high outflows from £ corporate bond 
funds and £ strategic bond funds. As equity markets 
rebounded, further adjustments back into fixed 
income have been made. 
• Calls on cash: Some of the activity in March must 
represent a move to cash, either as a ‘flight to safety’ 
and/or reflecting the need to draw on assets invested 
to convert them into cash for immediate expenses. 
If a household income dropped significantly as a 
result of being furloughed or self-employed in an 
industry that was effectively shut-down, drawing on 
investments may not have been desirable but could 
have been a necessity in order to pay mortgages or 
other household expenses. To meet these needs, 
investors may have sold down fixed income or 
mixed asset funds to avoid crystallising the losses 
sustained on equities. 
• Short-term risk management plays: Volatility was a 
feature across asset classes, with conditions in both 
the bond and equity markets becoming exceptionally 
challenging in mid-March. It is possible that some 
investors may have opted to reduce their exposure 
to bonds in immediate reaction to this. The massive 
scale of bond buying programmes from the Federal 
Reserve, the BoE and the ECB helped to drive greater 
liquidity and improve price stability but this pulled 
through into bond markets at the end of March. 
PROPERTY CHALLENGES 
Sales to funds investing in property have been 
consistently lower in the years following the Brexit 
referendum and the suspension of redemptions from 
funds investing in UK physical commercial property 
in July 2016, and have been in net outflow (see Chart 
45). Funds under management had also dropped back 
at the end of 2019 to £28.2 billion, levels last seen in 
2016. 53% of the £28.2 billion was invested in funds 
investing directly in property, 21% of FUM was in 
property securities funds and 5% of property FUM was 
invested in hybrid funds.
CHART 45: NET RETAIL SALES BY TYPE OF PROPERTY 
FUND (2010-2020)
Property Securities                       Direct                      Hybrid 
2.0
1.5
1.0
0.5
0
-0.5
-1.0
-1.5
-2.0
£bn
2010    2011    2012    2013    2014     2015    2016    2017    2018     2019    2020  
In 2018, the IA split the Property sector into UK 
Property Direct and Property Other, which contains 
funds investing in property securities, a hybrid of 
direct and securities and global physical property 
funds. Chart 45 shows that sales to funds investing 
in property securities, which are more liquid, have 
outstripped sales to funds investing in direct property 
since 2017. Cumulative sales to property security funds 
over 2019 were £530 million, compared with an outflow 
of £1.8 billion from funds investing directly in property.

77
INVESTMENT MANAGEMENT SURVEY 2019-20 | RETAIL FUND MARKET 
5
The net retail sales data in 2020 in Chart 45 is affected 
by the widespread suspension of redemptions and 
subscriptions for daily and quarterly-traded open-
ended property funds investing directly in physical 
UK property. This is due to valuers qualifying their 
valuations with a material uncertainty clause meaning 
that fund managers cannot price units with any 
certainty. According to data from the Association of 
Real Estate Funds, 35 property funds suspended in 
March (21 UK domiciled funds). Whilst most funds 
remain suspended, at the time of writing some firms 
have begun to lift their suspensions.21
The material uncertainty clauses were invoked 
by valuers once the UK Government took steps to 
introduce the national lockdown required to halt the 
spread of Covid-19. The material uncertainty was a 
result of the following drivers:
• Over lockdown, people shopped less, travelled less, 
could not eat out or commute in to offices, instead 
working from home.
• The revenue of retailers, hotels and restaurants was 
significantly reduced, and in some cases, revenues 
were non-existent during lockdown, which meant 
that they were less able to pay rent.
• The investment value of a property is derived from 
its income stream, the rent. If this is at risk, so is the 
value.
OUTCOME AND ALLOCATION 
The last 15 years have seen what increasingly appears 
to be a structural shift in investor preference for 
what the IA terms outcome and allocation funds. 
These include the mixed asset sectors as well as 
some specialist funds, money market funds, targeted 
absolute return and volatility managed. The proportion 
of total net sales to outcome and allocation funds 
has risen from 23% in the decade before the Global 
Financial Crisis to 43% since 2009. This shift in the 
balance of net retail sales is largely at the expense of 
flows to equity growth funds, which have declined as a 
proportion of sales to 16% from 33% in the preceding 
period (see Chart 46).
CHART 46: CUMULATIVE NET RETAIL SALES BY INVESTOR 
OBJECTIVE PRE-2008 AND POST-2008
Equity Growth                  Equity Income                 Fixed Income
Outcome and allocation              Property
1999-2008                                        2009-2020
33%
11%
26%
23%
6%
16%
9%
27%
43%
4%
This story remains intact into 2020 as Chart 47 shows. 
However, there are some important sub-trends, 
particularly affecting Targeted Absolute Return funds. 
Whilst we continue to see steady inflows to mixed 
investment funds over the last fifteen years, the 
targeted absolute return sector, which was launched in 
2008 and initially proved very popular with investors, 
has moved into outflow each quarter from Q3 2018. 
Total retail outflows through 2019 were £5.0 billion.
CHART 45: NET RETAIL SALES BY INVESTOR OBJECTIVE 
(2005 – JUNE 2020) 
Equity Growth                  Equity Income                 Fixed Income
Outcome and allocation              Property
50
40
30
20
10
0
-10
-20
£bn
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020 H1
21 This number is based on publicly available data on suspensions and information provided to AREF by its members. It is possible that there are 
fund suspensions that AREF is not aware of. Of these funds, the majority are Property Authorised Investment Funds (PAIFs) – either Non UCITs 
Retail Schemes (NURS) or Qualified Investor Schemes (QIS). They are all open ended.

THE INVESTMENT ASSOCIATION
78
In 2020, as the investment industry navigated the 
impact of the coronavirus on performance and on net 
sales, some suggested that the targeted absolute 
return sector might return to inflow. This type of 
outcome fund should be attractive for investors looking 
to achieve returns irrespective of market conditions. 
Whilst some funds in the sector have achieved positive 
net retail sales, Chart 48 shows that 2020 hasn’t 
heralded the reversal in fortune that might have been 
anticipated and net outflows for the first two quarters 
of 2020 have reached £3.2 billion.
CHART 48: NET RETAIL SALES TO TARGETED ABSOLUTE 
RETURN FUNDS BY ASSET CATEGORY (2010- JUNE 2020)
TAR - Mixed Asset                TAR - Fixed Income             
TAR- Equity                             TAR - Other       
            
 
6
4
2
0
-2
-4
-6
£bn
2010     2011     2012    2013    2014     2015    2016    2017     2018     2019     2020
                                                                                                                                                              H1
Where flows to targeted absolute return funds have 
faltered, the Volatility Managed sector has consistently 
attracted inflows since its launch in 2017. This type of 
fund often maps to the advisers’ risk profiling process 
to help build investor portfolios that are suitable for 
different risk appetites. A medium risk tolerance is 
likely to be the most common result. Chart 49 divides 
the funds in the volatility managed sector into funds 
managing returns within low, medium and high 
volatility parameters.22 
22 As there is no standardised industry approach to what constitutes a low, medium or high volatility parameter, this chart is based on fund names 
and investment objectives.
23 The other sectors being UK All Companies, Property Other, Global Emerging Markets, Standard Money Markets and Short-term Money Markets.
The volatility managed sector was one of only six 
sectors to see an inflow in March 202023, net retail 
sales for the month were £250 million and proved 
able to weather March’s significant outflows more 
effectively than the mixed asset sectors.
CHART 49: NET RETAIL SALES TO THE VOLATILITY 
MANAGED SECTOR SPLIT BY FUNDS MANAGING TO LOW, 
MID AND HIGH VOLATILITY BANDS
Low                 Mid                 High  
800
700
600
500
400
300
200
100
0
-100
-200
£m
Apr 17
May 17
Jun 17
Jul 17
Aug 17
Sep 17
Oct 17
Nov 17
Dec 17
Jan 18
Feb 18
Mar 18
Apr 18
May 18
Jun 18
Jul 18
Aug 18
Sep 18
Oct 18
Nov 18
Dec 18
Jan 19
Feb 19
Mar 19
Apr 19
May 19
Jun 19
Jul 19
Aug 19
Sep 19
Oct 19
Nov 19
Dec 19
Jan 20
Feb 20
Mar 20
Apr 20
May 20
Jun 20

79
INVESTMENT MANAGEMENT SURVEY 2019-20 | RETAIL FUND MARKET 
5
COMPARING THE PATTERN OF RETAIL SALES 
WITH PREVIOUS CRISES 
The conditions that led to the GFC were completely 
different from 2020 but 2008 does bear comparison 
with 2020 because it gives us some sense of how 
investors have responded to significant market shocks 
in the past and how 2020 differs.24 
CHART 50: TOTAL SALES AS A PERCENTAGE OF FUM 
THROUGH CRISES
GFC (0=Sep-07)                                
Brexit referendum (0=Jan-16)     
Covid 19 (0=Feb-20)
1.5%
1.0%
0.5%
0.0%
-0.5%
-1.0%
-1.5%
-3  -2  -1  0  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26
Lehman Brothers
Northern Rock
Referendum
result
COVID 19
Months
Chart 50 shows that in 2007, when the run on Northern 
Rock made it apparent that the crisis was spreading 
internationally, we start to see outflows. The striking 
difference between 2008 and 2020 is the speed of 
events and the scale of outflows:
• In 2007/8 the full impact on sales plays out over a 
much longer time period than in 2020: the highest 
outflow of 0.5% of total FUM occurs ten months after 
Northern Rock in 2008, and sales are volatile over 
a 13 month period before moving into a sustained 
recovery.
• Outflows in 2020 begin in February but reach 
0.91% of FUM in March, the highest outflow ever in 
percentage terms as well as absolute terms. Inflows 
in April of 0.69% of FUM demonstrate the strength of 
the rebound in sales, and is far swifter than in 2008.
24 The scale of the UK funds market in 2008 was smaller, and IA data did not capture FUM in overseas domiciled funds at that time. This means 
that the most effective way of comparing the events of 2020 and 2008 is to look at outflows as a proportion of total FUM. We have combined 
institutional and retail sales as funds under management includes both institutional and retail assets.
LONGER-TERM PATTERNS 
The historic data clearly suggest that investors do react 
to significant events - and outflows are likely to occur 
if there are further shocks - but that sales recover 
quickly. 
Looking back at net retail sales over the last 15 years 
allow us to compare the long-term effects of the global 
financial crisis and the Brexit referendum with events 
of 2020 and the impact of the coronavirus pandemic:
• In 2008, in the depths of the Global Financial Crisis, 
net retail sales declined significantly year on year to 
£4.8 billion but they rebounded dramatically in 2009 
to a then record level of £29.8 billion. 
• A similar effect can be seen in response to the Brexit 
referendum. In 2016, net retail sales of £7.0 billion 
for the year were followed by a record £48.6 billion in 
2017. 
CHART 51: NET RETAIL SALES (2005- H1 2020)
Net retail sales                           Average 5 year inﬂow
60
50
40
30
20
10
0
£bn
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020 H1
Credit crisis
Brexit 
referendum

THE INVESTMENT ASSOCIATION
80
25 Pension providers reported receiving just over 57,000 transfers from DB schemes into DC plans in 2018/19 to the FCA. The number of transfers 
in the second 6 months of 2019 (24,800 received by 76 firms) was down 24% on those in the first 6 months (32,500 received by 83 firms). This 
was also noticeably lower than seen in the first 6 months that firms reported data to the FCA: from October 2017 to March 2018 (34,750), when 
the FCA states that there was a smaller population of reporting firms. The FCA attributes the decline to a range of factors, including a greater 
awareness of the risks of transfers as a result of increased media attention and FCA supervisory activity. 
However, a rebound in retail sales over 2021 similar to 
that seen in 2017 and 2009 may be optimistic:
• One very significant driver of the increase in average 
inflows post-2008 was the sharp reduction in 
interest rates. In 2007, the Bank of England base 
rate stood at 5.5%. It was lowered to 0.5% in 2008, 
where it remained for over seven years before being 
dropped to 0.25% in 2016. This made bank and 
building society deposits a relatively unattractive 
means of saving in the UK and investment funds 
benefited from this. 
• Despite the record-breaking inflow in 2017, we 
see a sharp reversal in 2018 and then a decline in 
the moving five-year sales average into 2020. This 
draws attention to a number of factors pre-dating 
the pandemic that have weighed on sales. A more 
negative outlook for global trade has affected 
markets since the ratcheting up of trade tensions 
between the US and China. Investors are also now 
used to a persistently low interest environment and 
there is therefore no clear new impetus for savers to 
transfer cash savings to funds. The assets flowing 
into funds from DB transfers through 2016 and 2017 
have also slowed substantially through 2018/2019 
according to FCA data.25 
UK EQUITIES – THE EROSION OF HOME 
BIAS
UK equities have declined substantially as a proportion 
of total UK investor FUM in the last 15 years. In 2005, 
UK equities represented 39% of FUM but this had 
fallen to 14% by June 2020 (See Chart 39). Since 2016’s 
Brexit referendum, UK equity funds have also seen 
sustained outflows. In this section, we explore three 
factors behind the erosion of UK investors’ home bias:
• A more uncertain economic outlook for the UK as a 
result of the Brexit referendum.
• Weaker total returns from the FTSE compared with 
other global capital markets and a dependence on 
dividends to boost total returns.
• Flat capital growth over a sustained period and a 
low weighting of the FTSE All-Share to higher growth 
industry sectors. 
IMPACT OF THE BREXIT REFERENDUM ON NET 
RETAIL SALES 
Chart 52 shows net retail sales over the last five years 
to the IA’s three UK equity sectors: 
• UK All Companies, the largest sector by FUM at £150 
billion in June 2020
• UK Equity Income (£41.8 billion as at June 2020)
• UK Smaller Companies (£13.7 billion as at June 
2020). 
In the years preceding the Brexit referendum, sales 
to UK equities had been volatile but between January 
2016 when the referendum was announced, until June 
2020 UK equities have seen heavy outflows of £12.7 
billion. The last quarter of 2019 saw a shift in this 
pattern in the run up to the UK general election as the 
prospect of a sizeable Conservative majority became a 
reality. Boris Johnson’s government set out a clear and 
UK EQUITIES ARE
14%  
OF UK INVESTOR FUM 
BY JUNE 2020

81
INVESTMENT MANAGEMENT SURVEY 2019-20 | RETAIL FUND MARKET 
5
stricter timetable for Brexit transition. Greater certainty 
around Brexit looks to have been a factor in attracting 
investors back to UK equities.
CHART 52: NET RETAIL SALES, UK EQUITY SECTORS (2015 
- JUNE 2020)
UK All Companies                  UK Equity Income                 UK Smaller Companies
1.5
1.0
0.5
0
-0.5
-1.0
-1.5
£bn
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18
Jan-19
Mar-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
May-20
COMPARATIVELY WEAK FTSE ALL-SHARE 
TOTAL RETURNS 
The uncertainty surrounding the outlook for the UK 
economy as a result of the Brexit transition has been 
a factor in driving retail sales but the FTSE attracts 
companies from around the world to list on it and UK 
companies trade globally too, so the fortunes of the 
UK economy are not the only influence on investor 
sentiment. 
The rise and fall in UK equity funds under management 
is principally governed by market movements rather 
than sales, and as Chart 53 illustrates, the total return 
delivered to investors by the FTSE All-Share has been 
the lowest of the major global markets in the last five 
years.
CHART 53: MAJOR GLOBAL EQUITY MARKETS TOTAL 
RETURN (2015 - JUNE 2020)
MSCI World                 MSCI Europe Ex UK                FTSE All-share                Nikkei 225     
MSCI Asia Pac Ex Jpn                     MSCI China                     Russell 3000
120%
100%
80%
60%
40%
20%
0%
-20%
Dec 2014
Feb 2015
Apr 2015
Jun 2015
Aug 2015
Oct 2015
Dec 2015
Feb 2016
Apr 2016
Jun 2016
Aug 2016
Oct 2016
Dec 2016
Feb 2017
Apr 2017
Jun 2017
Aug 2017
Oct 2017
Dec 2017
Feb 2018
Apr 2018
Jun 2018
Aug 2018
Oct 2018
Dec 2018
Feb 2019
Apr 2019
Jun 2019
Aug 2019
Oct 2019
Dec 2019
Feb 2020
Apr 2020
Jun 2020
 Source: Morningstar
The FTSE is very reliant on dividend payments from the 
companies that list on it to boost total returns. Chart 54 
shows the total return and capital return performance 
of the FTSE since 1985, illustrating the significant 
contribution that dividends have long made to total 
return. Capital returns over the same period have been 
flat.
CHART 54: FTSE ALL-SHARE TOTAL RETURN AND CAPITAL 
RETURN (1985 – JUNE 2020)
FTSE All-Share Capital Return                      FTSE All-Share Total Return 
2500
2000
1500
1000
500
0
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Refinitiv

THE INVESTMENT ASSOCIATION
82
If we strip out capital returns and look at how the FTSE 
All-Share compares with its global peers on the basis 
of dividend distributions then, the FTSE All-Share has 
offered the highest distributions since 2015. Higher 
dividend distributions do not make up for the lag on 
capital returns, however. The outlook for dividend 
distributions has weakened significantly in 2020: UK 
company dividend payments fell by 57% in Q2 2020 
compared with Q2 2019.26
CHART 55: MAJOR GLOBAL EQUITY MARKETS 
CUMULATIVE DIVIDEND PAYMENTS (2015 - JUNE 2020)
FTSE All-share                MSCI World                 MSCI Europe Ex UK                Nikkei 225      
MSCI Asia Pac Ex Jpn                     MSCI China                     Russell 3000
0.25
0.20
0.15
0.10
0.05
0.00
Dec 2014
Feb 2015
Apr 2015
Jun 2015
Aug 2015
Oct 2015
Dec 2015
Feb 2016
Apr 2016
Jun 2016
Aug 2016
Oct 2016
Dec 2016
Feb 2017
Apr 2017
Jun 2017
Aug 2017
Oct 2017
Dec 2017
Feb 2018
Apr 2018
Jun 2018
Aug 2018
Oct 2018
Dec 2018
Feb 2019
Apr 2019
Jun 2019
Aug 2019
Oct 2019
Dec 2019
Feb 2020
Apr 2020
Jun 2020
 Source: Morningstar
26 Link Asset Services’ Dividend Monitor Q2 2020
27 The FTSE All-Share accounts for 98% of the market capitalisation of the FTSE
THE PROFILE OF COMPANIES LISTED ON 
THE FTSE 
Chart 56 shows the significant differences in the profile 
of company listed on the FTSE All-Share27, with those 
of its US counterpart, the Russell 3000. Technology, 
communication services and healthcare are industry 
sectors that have remained resilient through 2020 and 
these are grouped on the left-hand side of the chart. 
These industries account for 49% of the Russell 3000 
but just 22% of the FTSE All-Share.
CHART 56: COMPARISON OF THE WEIGHTING BY 
INDUSTRY SECTOR OF THE FTSE ALL-SHARE AND 
RUSSELL 3000
Technology                               Communication Services                     Healthcare         
Consumer Cyclical               Consumer Defensive                              Real Estate
Utilities                                      Industrials                                                   Basic Materials
Energy                                        Financial Services 
0%       10%       20%        30%       40%       50%        60%       70%        80%      90%     100%
Russell 3000
FTSE All-share
0%       10%       20%        30%       40%       50%        60%       70%        80%      90%     100%
Source: Morningstar
Technology companies have delivered strong growth 
in capital returns in recent years. The FAANG stocks: 
Facebook, Apple, Amazon, Netflix and Google 
(Alphabet) are all listed on the Nasdaq. These 
technology giants make up a substantial proportion 
of the market capitalisation of the S&P 500 and the 
Russell 3000. Technology companies overall make up 
24% of the Russell 3000 but only 2% of the FTSE All-
Share.

83
INVESTMENT MANAGEMENT SURVEY 2019-20 | RETAIL FUND MARKET 
5
Just over a third of the FTSE All-Share, according to 
Morningstar’s categorisation of the underlying stocks, 
is comprised of financials (17%), energy (9%) and basic 
materials (10%). These companies account for 18% of 
the Russell 3000. 
Energy and financial companies have historically been 
consistent and generous dividend payers. However, on 
the 31st of March 2020, the Bank of England asked 
deposit takers, which include the major banks listed 
on the FTSE, to suspend dividend payments and share 
buybacks until at least January 2021 (at the current 
time of writing). The BoE made this request in order 
to provide ‘extra headroom’ on capital reserves in an 
uncertain economic outlook where rising loan defaults 
are in prospect. 
In the energy sector, Royal Dutch Shell, the third largest 
company on the FTSE 100 by market capitalisation, 
announced a reduction in its dividend payment in Q1 
2020 to 0.16 per share shrinking the dividend payment 
by 66%. This comes on the back of a steep fall in oil 
prices. 
The low weighting to industry sectors that have the 
highest capital growth potential and the reduction in 
dividend payments from core industry sectors means 
that investors in this broad spectrum of UK listed 
equities face stronger headwinds than those investing 
in the FTSE’s US and global peers.
INCREASING INTEREST IN INDEXING 
FUNDS
The growth of assets in indexing funds as a proportion 
of FUM mirrors the pattern that we see in AUM. Growth 
has been gradual but the pace is accelerating post 
2012 when indexing funds accounted for 8% of FUM to 
18% in June 2020.
Any increase in FUM is always supported by strong 
asset appreciation, and as markets rose, particularly 
in Q4 2019, this contributed to indexing funds under 
management reaching £230 billion at the end of the 
year, up 26% year on year from 2018. This compares 
with a 1% increase between 2017 and 2018 as 
challenging markets in the last quarter of 2018 eroded 
gains in FUM.
CHART 57: ACTIVE FUNDS AND INDEXING FUNDS AS A 
PROPORTION OF TOTAL FUNDS UNDER MANAGEMENT 
(2004-2020 JUNE)
100%
80%
60%
40%
20%
0%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
June 2020
Active FUM                      Tracker FUM
FUM IN 
INDEXING FUNDS IS UP
26%  
BETWEEN YEAR-END 
2018 AND 2019

THE INVESTMENT ASSOCIATION
84
Chart 58 shows that net sales have also made a 
significant contribution to the growth of FUM. In 
addition, it shows the relative resilience of net sales 
when assets depreciated sharply in March 2020.
CHART 58: DRIVERS OF INDEX FUND GROWTH (2013 - 
JUNE 2020)
Cumulative net sales             Cumulative asset appreciation                  
Jan 13
Jul 13
Jan 14
Jul 14
Jan 15
Jul 15
Jan 16
Jul 16
Jan 17
Jul 17
Jan 18
Jul 18
Jan 19
Jul 19
Jan 20
250
200
150
100
50
0
£bn
The pattern of net retail sales to indexing funds in 
2019 and 2020
Net retail sales to indexing funds have been persistent 
over the last ten years, with no quarterly net outflows. 
Sales to active funds have shown much greater 
volatility. From 2018, a step change in the level of sales 
flowing to indexing funds occurs. Net retail sales to 
indexing funds in 2018 are up at £9.0 billion, whereas 
active fund sales ended the year on an outflow of £1.3 
billion. Whilst this is slightly lower than the £10.8 billion 
in sales to index trackers in 2017, 2017 was a record 
year for sales and index trackers accounted for 22% of 
total inflows. In 2018, this balance shifted significantly. 
This pattern is repeated in 2019, cumulative net retail 
sales to indexing funds stood at £18.1 billion, whereas 
outflows from active funds reached £8.3 billion.
CHART 59: NET RETAIL SALES BY INDEX FUNDS AND 
ACTIVE FUNDS PRE- AND POST-2014
Active                       Tracker                            
100%
90%
80%
70%
60%
50%
40%
30%
20%
0%
2008-2013                                           2014-2019
87%
13%
52%
48%
SINCE 2014
NEARLY
HALF  
OF TOTAL NET RETAIL 
SALES ARE TO INDEX 
TRACKERS

85
INVESTMENT MANAGEMENT SURVEY 2019-20 | RETAIL FUND MARKET 
5
Sales to indexing funds are resilient when 
markets fall
When capital market returns have fallen sharply, as in 
the last quarter of 2018 and again in March 2020 in one 
of the steepest declines ever seen over a month, sales 
to indexing funds have remained resilient. In Q4 2018, 
£6.1 billion in inflows to index funds compared with 
outflows of £7.7 billion from active funds.
In March 2020, the month of the highest ever outflow 
from retail funds, index funds still managed to generate 
positive sales of £467 million against an outflow of 
£10.1 billion from active funds. Despite the fact that 
indexing funds by their nature follow the markets down, 
the data show that market shocks have not deterred 
investors from using index trackers. 
CHART 60: NET RETAIL SALES TO ACTIVE AND INDEX 
TRACKING FUNDS (2010 - Q2 2020)
20
15
10
6
0
-5
-10
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Active NRS                   Tracker NRS
£bn
Sales to indexing funds by asset class
Traditionally, indexing funds are seen as dominated 
by funds tracking developed market equity indices 
such as the S&P 500 or the MSCI World, the argument 
for using lower cost indexing funds being that in 
these markets it is harder for more expensive actively 
managed funds to beat the index benchmark because 
of the wide availability of research. Sales to equity 
index trackers accounted for 50% of net retail sales to 
indexing funds in 2019 but as Chart 61 shows, net sales 
to fixed income and multi-asset indexing funds have 
been rising as a proportion of sales since 2016.
CHART 61: NET RETAIL SALES OF INDEXING FUNDS BY 
INDEX INVESTMENT TYPE (2010- JUNE 2020)
UK equity                            European equity                    North American equity            
Global equity                    Fixed income                           Mixed asset                   
Other                  
24
19
14
9
4
-1
£bn
2010    2011  2012   2013   2014   2015    2016   2017   2018   2019    2020
                                                                                                                                               H1

THE INVESTMENT ASSOCIATION
86
RESPONSIBLE AND SUSTAINABLE 
INVESTMENT 
2019 and the first half of 2020 have seen a rise in 
the prominence of sustainability issues, both in the 
investment management industry and in wider society. 
In 2019, the particular focus was on climate change 
and the need to decarbonise the global economy while 
in 2020, the Covid-19 pandemic has focused attention 
on the social impacts of business activity.
The FUM in responsible investment funds grew by 
89% between January 2019 and June 2020. This 
increase meant that the RI share of industry FUM rose 
by over 70% over the 18 months leading to June 2020 
(see Chart 62), illustrating the impact of the growing 
prominence of sustainability and social responsibility 
on the funds market. While absolute values for RI FUM 
suffered in line with market movements in March 2020, 
funds investing responsibly have continued to grow 
as a proportion of FUM month on month, with FUM 
reaching a high of £33 billion in June 2020 as asset 
prices recovered and inflows continued.
CHART 62: RESPONSIBLE INVESTMENT FUM (2019 - 
JUNE 2020)
Responsible Investment FUM                             % of industry total (RH)   
35
30
25
20
15
10
5
0
£bn
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Net retail sales to RI funds have proved remarkably 
consistent across the past 18 months, with net inflows 
for every month. Net retail sales between January 2019 
and June 2020 were £7.0 billion. In the first six months 
of 2020, net retail sales to RI funds were four times 
higher than the same period in 2019. Sales to RI funds 
are not confined to equities: sales to fixed income 
funds (19%) and mixed asset funds (34%) accounted 
for over half of total sales between January 2019 and 
June 2020.
Even as the wider industry saw record outflows of 
£9.7 billion in March 2020, the net retail flows to RI 
funds remained positive, if somewhat reduced, at £124 
million. 
Total sales from January 2019 to June 2020 were £7.2 
billion, a significant driver of the £15.5 billion increase 
in the FUM shown in Chart 63. Alongside institutional 
inflows of £1.8 billion, and asset appreciation, the 
addition of new funds has also been a driver, with a 
30% increase in the number of RI funds as managers 
have created new products to meet investor demand.
CHART 63: RESPONSIBLE INVESTMENT NET RETAIL SALES 
BY ASSET CLASS (2019 - JUNE 2020)
Equity                              Fixed Income                              Mixed Asset 
1,200
1,000
800
600
400
200
0
-200
-400
£m
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20

87
INVESTMENT MANAGEMENT SURVEY 2019-20 | RETAIL FUND MARKET 
5
Responsible Investment can be considered an area 
where active management offers particular value to 
investors. These funds have the potential to increase 
returns through identifying opportunities and risks 
brought about by societal change, whilst also allowing 
investors to align their investments with non-financial 
objectives. 
Investing in companies that promote societal good, or 
at the very least avoiding companies that are deemed 
unethical, do not necessitate that investors sacrifice 
returns: and active investment managers are seeking to 
correct this legacy perception. 
Chart 64 compares net retail sales to actively managed 
funds with those to actively managed RI funds, which 
so far represent the overwhelming majority of RI funds. 
Active funds as a whole show considerable volatility 
in sales patterns and have seen outflows of £8.6 
billion through 2019/20. Active RI funds have attracted 
consistent inflows, taking in £7 billion in investor 
money. This suggests that RI funds are less affected 
by short term market events and sentiment, attracting 
investors with a different set of priorities.
CHART 64: RESPONSIBLE INVESTMENT ACTIVE SALES 
AND INDUSTRY ACTIVE SALES (2019 - JUNE 2020)
Active net retail sales                       Responsible Investment active net retail sales  
6
4
2
0
-2
-4
-6
-8
-10
-12
£bn
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
UK INVESTORS AND OVERSEAS 
DOMICILED FUNDS  
While many thousands of overseas funds are 
recognised for UK distribution, UK retail investors 
in particular have had a historic preference for UK-
domiciled funds. Nevertheless, as Chart 65 shows, 
overseas domiciled funds are now 16% as a proportion 
of UK investor FUM, an increase of 5% from Q1 2017. 
CHART 65: UK INVESTOR FUM IN OVERSEAS DOMICILED 
FUNDS (2017- Q2 2020)
!"
$!
%
&
UK investors in UK domiciled funds
UK investors in overseas domiciled funds
Proportion of FUM held by UK investors in overseas domiciled funds (RH) 
1,400
1,200
1,000
800
600
400
200
0
£bn
18%
16%
14%
12%
10%
8%
6%
4%
2%
0
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020

THE INVESTMENT ASSOCIATION
88
Chart 66 shows the breakdown of total UK investor 
FUM by fund structure, both UK and overseas. There 
are three overseas fund structures principally invested 
in by UK investors: 
• Société d’investissement à Capital Variable (SICAV), 
mainly domiciled in Luxembourg.
• Irish Collective Asset-management Vehicle (ICAV).
• Overseas Open-Ended Investment Company (OEIC) 
/ Investment Company with Variable Capital (ICVC), 
the majority of these funds in IA data are domiciled 
in Ireland. 
The growth in FUM in overseas domiciled funds has 
chiefly been in overseas OEICs/ICVCs, whilst FUM in 
SICAVs has remained flat since 2012. ICAVs represent a 
tiny proportion of total FUM. 
CHART 66: UK INVESTOR FUM BY FUND STRUCTURE 
(2012- JUNE 2020)
UK OEIC/ICVC                     Unit Trust                     Overseas OEIC/ICVC
ICAV                                         SICAV                  
Jan 12
Apr 12
Jul 12
Oct 12
Jan 13
Apr 13
Jul 13
Oct 13
Jan 14
Apr 14
Jul 14
Oct 14
Jan 15
Apr 15
Jul 15
Oct 15
Jan 16
Apr 16
Jul 16
Oct 16
Jan 17
Apr 17
Jul 17
Oct 17
Jan 18
Apr 18
Jul 18
Oct 18
Jan 19
Apr 19
Jul 19
Oct 19
Jan 20
Apr 20
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Net retail sales can be used as a barometer of investor 
sentiment towards overseas domiciled funds. Chart 67 
does not suggest that investors and their investment 
advisers have been unduly influenced by the domicile 
of the fund when making investment decisions in the 
context of the UK leaving the European Union. Sales in 
2019 to overseas domiciled funds were £4.2billion, an 
increase on 2018’s £1.3 billion in inflows. 
In March 2020, we did see substantial outflows from 
overseas OEICs/ICVCs and SICAVs accounting for 
nearly half of total outflows that month. Rather than 
this being a sign that investors were turned off funds 
domiciled overseas, it is due to the scale of outflows 
from the fixed income asset class: 57% of funds 
investing in fixed income are domiciled overseas. 
CHART 67: UK INVESTOR NET RETAIL SALES BY FUND 
STRUCTURE (2012 - JUNE 2020)
UK OEIC/ICVC                   Unit Trust                           Overseas OEIC/ICVC
ICAV 
                      SICAV
6
4
2
0
-2
-4
-6
-8
-10
£bn
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
May-16
Sep-16
Jan-17
May-17
Sep-17
Jan-18
May-18
Sep-18
Jan-19
May-19
Sep-19
Jan-20
May-20

89
INVESTMENT MANAGEMENT SURVEY 2019-20 | RETAIL FUND MARKET 
5
OVERSEAS INVESTORS IN UK DOMICILED FUNDS 
As at June 2020, FUM in UK domiciled funds including 
funds managed on behalf of overseas investors is £1.32 
trillion – the overseas investor portion of this total is 
£40.7 billion. 
As Chart 68 shows, UK domiciled funds under 
management held by overseas investors has remained 
at 4% of FUM since Q4 2018. The decline from 7% in 
Q1 2018 to 4% in Q4 2018 was driven by operational 
decisions at a number of firms to move overseas 
investors out of non-sterling denominated share 
classes in UK domiciled funds, it is not a reaction by 
overseas investors to the impending Brexit. 
CHART 68: UK DOMICILED FUNDS BY INVESTOR PROFILE 
(2017-Q2 2020)
!"
$!
%
&
'!"
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
UK investors in UK domiciled funds
Overseas investors in UK domiciled funds
UK investors in overseas domiciled funds
Proportion of UK funds held by overseas investors (RH) 
1,600
1,400
1,200
1,000
800
600
400
200
0
£bn
8%
7%
6%
5%
4%
3%
2%
1%
0
 
SALES BY DISTRIBUTION CHANNEL 
UK fund platforms remain the dominant retail 
distribution channel in 2019 with a 49% share of total 
gross sales28. Sales through platforms rose by 17% 
year on year to reach £127 billion, while gross sales 
as a whole rose by 6% to reach a total of £257 billion, 
reversing the slight decline seen from 2017 to 2018 and 
taking gross sales to a new high. 
Other UK Intermediaries including IFAs and Non-UK 
Intermediaries both saw gross sales increase year on 
year, by 14% and 9% respectively. All other channels 
saw gross sales decline, most notably the Discretionary 
Manager channel with an 18% decline from £28 billion 
in 2018 to £23 billion in 2019. The rise of discretionary 
model portfolios run by discretionary managers on 
platform is likely to mean that some of the gross sales 
recorded as discretionary are now showing up in gross 
sales through platforms.
CHART 69: GROSS RETAIL SALES BY DISTRIBUTION 
CHANNEL (2013-2019)
UK Fund Platforms                                       Other UK Intermediaries Including IFAs 
Discretionary Manager                               Non-UK Intermediaries            
Direct                                                                   Execution only Intermediaries   
Trustees and Custodians                                   
300
250
200
150
100
50
0
£bn
2013             2014             2015              2016             2017             2018             2019
28 The growth of the UK fund platform channel represents the increasing use of fund platforms by both direct and advised investors, and 
additionally reflects the recategorization of a number of businesses as fund platforms as business models have shifted over time.

THE INVESTMENT ASSOCIATION
90
Platforms were also the largest channel for net sales 
in 2019, however net retail sales for 2019 decreased by 
£2 billion to £10.9 billion. The ‘Other UK Intermediaries 
including IFAs’ channel appears to have staged 
something of a comeback with net sales of 
£3 billion, up from £0.2 billion in 2018. This is still a 
long way short of the sales seen in 2017.
Discretionary Managers show a rise in outflows to 
£1.1 billion, though this is at least in part driven by 
managers moving portfolios from funds to segregated 
mandates rather than a genuine outflow from the 
industry. The Direct channel continues to see outflows 
as the industry moves away from the traditional model 
of investors buying directly from asset managers.
The first half of 2020 has seen a shift in the patterns in 
distribution. Flows through the Other UK Intermediaries 
including IFAs channel have been strong and just 
under half are in the first quarter, a period when other 
channels saw flat sales or outflows. 
Sales through UK Fund Platforms remain healthy but 
have not been as dominant in 2020 as in previous years 
being only slightly higher than Other UK Intermediaries 
including IFAs. Sales through UK Fund Platforms have 
been concentrated in Q2 after being flat in Q1. The 
Discretionary Managers channel saw heavy outflows 
in Q1. This has reversed somewhat in Q2, with money 
returning particularly to fixed income funds. However, 
sales through Discretionary Managers remain in a deficit 
for the year so far. 
CHART 70: NET RETAIL SALES BY DISTRIBUTION 
CHANNEL (2013-2020)
60
50
40
30
20
10
0
-10
£bn
UK Fund Platforms                                       Other UK Intermediaries Including IFAs 
Discretionary Manager                               Non-UK Intermediaries            
Direct                                                                   Execution only Intermediaries   
Trustees and Custodians                                   
2013          2014           2015          2016          2017          2018          2019       2020 H1  
SALES TO TAX WRAPPERS 
Net sales to pension wrappers of £4.6 billion in 2019 
remain the highest of any wrapper on platforms reporting 
data to the IA. This is a reduction of 32% from the levels 
seen in 2018 and of nearly 50% from 2017 at the height of 
the influx of DB pension transfers into pension wrappers 
on platform. The rise in net sales to pension wrappers 
follows the introduction of the pension freedoms in 
2015. Whilst sales to pensions remain the highest as a 
proportion of total sales to wrappers, they have declined 
year on year following 2017’s high. At the half way point in 
2020 sales were a promising £2.0 billion but it is too early 
to say if they will top 2019.
2019 saw high outflows of £4.2 billion from unwrapped 
general investment accounts, the most significant over 
the last ten years. Outflows continued into the first half 
of 2020 at £903 million but were concentrated in the 
first quarter. 
Unwrapped assets are the least sticky. Without the 
commitment of a tax wrapper, investors appear to have 
chosen to withdraw unwrapped assets first in 2020 
rather than sacrifice the tax incentives provided by ISAs 
(ISA sales are £1.1 billion for H1 2020). The significant 
penalties for early withdrawal from pensions probably 
precluded many investors from calling on cash from 
them during the Covid-19 crisis. 
CHART 71: NET RETAIL SALES TO TAX WRAPPERS 
THROUGH UK FUND PLATFORMS (2010 - JUNE 2020)
ISA                   Insurance Bonds                  Personal Pensions                Unwrapped      
20
15
10
5
0
-5
-10
£bn
2010    2011    2012    2013    2014    2015    2016    2017     2018     2019   2020 H1

91
INVESTMENT MANAGEMENT SURVEY 2019-20 | RETAIL FUND MARKET 
5
Sales to ISAs fall in 2019
In 2019, assets in stocks and shares ISAs were £314 
billion according to data from HMRC, a decrease of 
11% from 2018. Assets in funds stood at £227 million 
or 71% of total assets, a decline of 4% from 2018.
CHART 72: TOTAL ASSETS IN STOCKS AND SHARES ISAS 
BY TYPE OF ASSET (2012 – 2019)
Shares                                                     EEA Shares                                 Securities
Gilts                                                          Unit Trusts                                   Shares in OEICs
Corporate Bond Funds                    Investment Trusts                   Units/Shares in UCITS
Surrender value of policies           Cash on deposit   
400
350
300
250
200
150
100
50
0
£bn
2012           2013          2014           2015          2016           2017          2018           2019
Source: HMRC
IA data show that in 2019 there was a huge fall in sales 
to ISA wrappers on platform (see Chart 71): sales of just 
£14 million are a decrease of 99% year on year. IA data 
covers five of the largest platforms by assets under 
administration but HMRC data for the 2018/19 tax year, 
which is more comprehensive, also show a decline in 
subscriptions to stocks and shares ISAs.
In 2018/19 there was a 19% decrease in the amount 
subscribed to stocks and shares ISAs to £26 billion. 
Average subscription amounts only fell slightly by 4% 
to £9,331 and remain higher than the average cash 
ISA subscription of £5,187 in 2018/19. There was 
a sharper decrease in the number of people using 
stocks and shares ISAs in 2018/19 compared with 
cash ISAs however. A 16% fall in the numbers of people 
subscribing to stocks and share ISAs in 2018/2019 
corresponds to a 20% increase in the number of 
subscriptions to cash ISAs. This is the first year since 
2013/14 that we have seen an increase year on year in 
the number of cash ISA subscriptions.
CHART 73: TOTAL SUBSCRIPTIONS TO CASH AND STOCKS 
AND SHARES ISAS (08/09 -18/19)
Cash                     Stocks and shares                      Cash:Stocks & Shares ratio (RH) 
70
60
50
40
30
20
10
0
£bn
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
Source: HMRC
2018/19 may be a blip or it may be the beginning of a 
sustained trend. IA sales data to ISAs for H1 2020 is 
more promising, with sales of £1.6 billion in Q2 more 
than recovering the first quarter outflow of £522 
million. Very low interest rates of 0.25% make cash 
ISAs unattractive but if volatility in investment returns 
increases through H2 2020 into 2021, nervy investors 
could be drawn to the perceived safety of cash.

THE INVESTMENT ASSOCIATION
92
INVESTOR AVERAGE HOLDING PERIODS 
A reduction in investor holding periods has been 
observed since the widespread adoption of investment 
platforms in the UK, making it substantially easier to 
switch assets between funds on platform. The rise of 
the centralised investment proposition, now used by 
82% of advisers and often taking the form of a model 
portfolio of funds, means that fund allocations are 
now rebalanced on a quarterly basis. This also helps to 
explain the reduction in average holding periods.
Average investor holding periods stood at around 
3.4 years in 2019 following a low of 3.2 in 2018.29 For 
investment managers seeking to encourage longer-
term investment horizons, it is encouraging to see 
holding periods stabilise rather than fall further. It is 
likely that three years is a floor for investor holding 
periods: it is typically the minimum track record that 
advisers want to see before investing in a fund. 
CHART 74: RETAIL INVESTOR AVERAGE HOLDING PERIODS 
(2005–2019)
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
8
7
6
5
4
3
2
1
0
Years
29 We calculate the average holding period as the average FUM in retail funds over two years (less net sales in the second year), divided by the 
repurchases from these funds.
30 According to EFAMA data, in Denmark there were 406 fund suspensions (213 equity, 122 bond, 73 multi-asset); in Finland 20 bond fund 
suspensions; in Sweden 24 bond and 8 multi-asset fund suspensions and in Norway one High Yield bond fund suspension in March.
EUROPEAN DOMICILED FUNDS 
The pattern of sales to European domiciled funds 
shows that after the outflows experienced in Q4 2018, 
sales rebounded on the back of rising capital market 
returns through 2019. The pace of the recovery was 
slow in the first half of the year: 77% of inflows came in 
the second half of 2019. Total sales to UCITS funds for 
2019 were €395.9 billion, compared with net sales of 
€118.4 billion in 2018. 
Outflows across Europe in the first quarter of 2020 
were €176 billion in a similar pattern to UK retail fund 
outflows. March’s sharp downturn in capital market 
returns coincided with a challenging environment 
in the bond markets. There were short-term bond 
and multi-asset fund suspensions in Finland, 
Norway and Sweden and in Denmark some equity 
funds, alongside bond and multi-asset funds, were 
temporarily suspended from taking subscriptions and 
redemptions.30 These suspensions were brief as a 
result of the swift intervention of Central Banks in the 
bond markets through quantitative easing.
CHART 75: EUROPE-WIDE UCITS NET SALES 
(2018 - Q1 2020)
Total UCITS              UCITS ETFs                             
200
150
100
50
0
-50
-100
-150
-200
Q1             Q2             Q3             Q4             Q1            Q2             Q3             Q4             Q1
2018        2018        2018        2018        2019       2019        2019        2019        2020
€bn
Source: EFAMA

93
INVESTMENT MANAGEMENT SURVEY 2019-20 | RETAIL FUND MARKET 
Total sales to UCITS ETFs increased dramatically in 
2019 to €104.4 billion, an increase of 477% on 2018 
where total sales to UCITS ETFs were €18.1 billion, 
indicating that 2019 marked a step change in the 
uptake of ETFs by European investors. ETFs were also 
affected by challenging market conditions in March 
and saw outflows in Q1 2020 of €10.6 billion. Fears that 
ETF structures might pose risks in challenging market 
conditions were quelled, however and fixed income 
ETFs emerged as efficient price discovery tools in the 
bond markets at the height of the crisis.
FUM by domicile
Funds under management in UCITS and AIFs domiciled 
in Luxembourg, Ireland and the UK all rose year on year 
from 2018 but the rise in FUM is more substantial in 
Ireland than in the UK and Luxembourg.
• FUM in funds domiciled in Luxembourg rose to €4.7 
trillion, an increase of 16% from 2018.
• Ireland’s FUM total reached €3.0 trillion up from €2.4 
trillion in 2018, a rise of 26%.
• In the UK, FUM in 2019 was €1.7 trillion increasing 
by 17%, a similar proportion year on year to 
Luxembourg.
CHART 76: ASSETS IN UCITS AND AIFS BY DOMICILE
2017                 2018                 2019                             
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Luxembourg                              Ireland                                        UK
€bn
5
SALES 
OF UCITS ETFS WERE
IN 2019
€104.4
BN

THE INVESTMENT ASSOCIATION
94
6 OPERATIONAL AND 
STRUCTURAL ISSUES  
REVENUE AND COSTS 
>>  Total average industry net revenue stood at £22.9 
billion in 2019, equating to 28bps of total assets.
>>  Total operating costs in 2019 were £15.8 billion, 
representing 20bps of total assets under 
management. 
INDUSTRY EMPLOYMENT  
>>  Around 113,000 jobs are supported by the UK 
investment management industry, either directly or 
indirectly. This number has changed little from 2018.
>>  The UK investment management industry directly 
employed an estimated 40,000 people at the end of 
2019, almost unchanged from 2018.
>>  Jobs in the investment management industry vary 
by location, with the largest proportion in London 
being employed in investment management and 
operations and fund administration being of greater 
importance in Scotland.
INDUSTRY CONCENTRATION 
>>  The UK investment management industry remains 
relatively unconcentrated. Assets managed by the 
top five and the top ten firms stood at 43% and 
58% of total assets respectively.  Both were one 
percentage point higher than in 2018.
>>  The industry continues to comprise a small number 
of very large firms but a long tail of medium- and 
small-sized organisations. The median figure for 
assets managed by IA member firms was similar to 
2018, at £10 billion, compared to a mean figure of 
£51 billion.
ASSET MANAGER OWNERSHIP 
>>  Over the past decade the proportion of UK asset 
managers owned by a parent headquartered in the 
US has increased from 40% to 46%, though the 
proportion has been relatively stable for the past 
five years.
>>  The number of independent asset managers now 
stands at 42%, ten percentage points higher than 
it was a decade ago. This in part reflects the high 
levels of M&A activity seen in the industry over that 
period. 
KEY FINDINGS

95
INVESTMENT MANAGEMENT SURVEY 2019-20 | OPERATIONAL AND STRUCTURAL ISSUES 
6
REVENUE AND COSTS 
Aggregate revenue and cost figures for the industry 
cover both in-house and third party business. 2019 
figures reflect a change in methodology. In addition to 
returns from members, the dataset for 2019 utilises 
publicly available data obtained from submissions 
to Companies House where available. This has 
enabled access to substantially more data than would 
otherwise be possible. Due to some omissions or 
delays in submission due to the Covid-19 pandemic 
in 2020, we would expect to be able to make further 
improvements to this dataset in future reports. It 
should be noted that this change in methodology 
means that numbers may not be directly comparable 
to previous years, although the data indicate that there 
has been a gradual fall in profitability from around 35% 
to 31% over the past five years.
• Total average industry net revenue stood at £22.9 
billion, representing 28 bps of total assets. 
• Total operating costs in 2019 were £15.8 billion. In 
basis point terms this represented 20bps of total 
average assets under management.
• Profitability based on headline data stood at 31%31 
The average profitability figure is a useful measure for 
monitoring year on year changes in the overall industry. 
However, it can hide the fact that investment managers 
operate in a very diverse environment and there is 
significant variation in profitability between individual 
IA member firms. Chart 77 shows the distribution of 
profitability of respondent firms in 2019 covering a very 
broad range, from -63% to 89%.
CHART 77: DISTRIBUTION OF ASSET MANAGER 
PROFITABILITY (2019)
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
-80%
31 Calculated as net revenue less costs divided by net revenue. Figure not directly comparable to previous years due to change in methodology in 2019

THE INVESTMENT ASSOCIATION
96
EMPLOYMENT IN THE INVESTMENT 
MANAGEMENT INDUSTRY 
The IA has been monitoring direct employment 
numbers in the investment management industry 
since 2006. In recent years this has been broadened 
to include an estimate of the level of employment 
in supporting industries such as custodian banks, 
transfer agents and wealth managers. Data also now 
includes those employed by the IA’s affiliate members, 
notably legal firms providing services to the investment 
management industry.
The IA estimates that the UK investment management 
industry supports around 113,000 jobs in the UK. 
Nearly 40,000 people are employed directly by 
investment management firms. The remainder are 
employed in IA affiliate members and in fund and 
wider administration services and securities and 
commodities dealing activities. These numbers are 
broadly unchanged from 2018.32 
The bulk of this resource is concentrated in London and 
South East England, with a broader regional footprint, 
particularly seen in a strong Scottish industry. 
Figure 13 shows this in more detail. Specifically, 
IA members have offices across the UK. Locations 
include: Bristol, Birmingham, Bournemouth, Cardiff, 
Chester, Chelmsford, Guildford, Harrogate, Henley, 
Leeds, Manchester, Norwich, Oxford, Peterborough, 
Southampton, Swindon and York.33 In addition, a 
number of firms have offices in other parts of the 
British Isles, notably the Channel Islands.
 
32 Our figures do not include the estimated 26,000 financial advisers in the UK, who provide a distribution point for a wider variety of financial 
services alongside funds and/or discretionary wealth management (e.g. insurance).
33 It is difficult to identify jobs associated with investment management among firms that have a remit that extends wider than their investment 
management support, such as consultants, lawyers and accountants. In addition, a substantial number of roles in areas such as IT are outsourced 
to third party organisations and cannot be discretely measured. The figures provided in this section should therefore be viewed as a conservative 
estimate of those employed in investment management related roles. 
FIGURE 13: DIRECT AND INDIRECT EMPLOYMENT IN 
INVESTMENT MANAGEMENT IN THE UK
 
TOTAL:  113,000
 
DIRECT: 40,000
 INDIRECT: 73,000
NORTHERN 
IRELAND
 
DIRECT: 50
 INDIRECT: 600
SCOTLAND
 
DIRECT: 7,200
 INDIRECT: 6,500
NORTH EAST
 
DIRECT: 100
 INDIRECT: 200
NORTH WEST
 
DIRECT: 150
 INDIRECT: 3,900
WEST MIDLANDS
 
DIRECT: 300
 INDIRECT: 900
WALES
 
DIRECT: 300
 INDIRECT: 1,600
SOUTH WEST
 
DIRECT: 400
 INDIRECT: 7,600
SOUTH EAST
 
DIRECT: 1,250
 INDIRECT: 3,000
LONDON
 
DIRECT: 29,500
 INDIRECT: 42,000
YORKSHIRE AND 
THE HUMBER
 
DIRECT: 300
 INDIRECT: 1,000
EAST MIDLANDS
 
DIRECT: 100
 INDIRECT: 300
EAST OF 
ENGLAND
 
DIRECT: 500
 INDIRECT: 4,800
Source: IA estimates from information provided by members and 
publicly sourced information. All regional numbers have been 
rounded to the nearest 50 and therefore may not add to exact total

97
INVESTMENT MANAGEMENT SURVEY 2019-20 | OPERATIONAL AND STRUCTURAL ISSUES 
6
DIRECT EMPLOYMENT 
An estimated 40,000 people are directly employed 
by asset managers in the UK. This figure is almost 
unchanged since the end of 2018. It is notable that the 
numbers employed in investment management in the 
UK did not fall during the year in which the UK left the 
EU. This suggests that firms have managed to adapt 
their businesses without the loss of staff numbers. It 
may also indicate that EU nationals have not on the 
whole been tempted to leave the UK in order to remain 
within the EU.
CHART 78: INDUSTRY DIRECT HEADCOUNT ESTIMATE VS. 
UK ASSETS UNDER MANAGEMENT (2009-2019)
Industry direct headcount                      Total AUM in the UK (RH)
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
£bn
2009   2010   2011  2012   2013   2014   2015  2016   2017   2018   2019
The investment management industry involves 
significant levels of outsourcing, notably in IT. 
Consequently, these figures are likely to understate 
the numbers working to directly support investment 
management activity. 
DISTRIBUTION OF STAFF BY ACTIVITY 
Table 5 provides more detail on the number of 
employees directly employed by asset managers in the 
UK by function. Around a quarter of directly employed 
staff were involved in investment management activity. 
TABLE 5: DISTRIBUTION OF STAFF BY ACTIVITY 
(DIRECT EMPLOYMENT)	
	
                                                                        Percentage 	
	
	
	
	
	
   of total  
Activity                                                                         headcount
Investment Management of which	
24%
Investment management 
(asset allocation and stock selection)	
68%
Research, analysis	
25%
Dealing	
7%
Operations and Fund Administration of which	
18%
Investment transaction processing, 
settlement, asset servicing	
31%
Investment accounting, performance 
measurement, client reporting	
32%
Other fund administration (incl. CIS transfer 
agency, ISA administration etc.)	
37%
Business Development and Client 
Services of which	
18%
Marketing, sales, business development	
63%
Client services	
37%
Compliance, Legal and Audit of which	
8%
Compliance	
39%
Risk	
32%
Legal	
22%
Internal audit	
7%
Corporate Finance and Corporate 
Administration of which	
12%
Corporate finance	
43%
HR, training	
26%
Other corporate administration	
31%
IT Systems	
14%
Other Sector	
6%

THE INVESTMENT ASSOCIATION
98
Over the longer term some trends in staffing levels 
emerge. On a like-for-like basis over the last five years, 
Chart 79 shows the following changes:
• The proportion of people employed in investment 
management has fluctuated slightly year on year but 
has been relatively stable at around one quarter of 
the workforce (24% in 2019).
• Operations and fund administration roles have seen 
a four percentage point fall over the same period 
(from 22% to 18%).
• The proportion employed in Business Development 
and Client Service has fallen by two percentage 
points to 18% in 2019.
• The levels of staffing in Compliance, Legal and Audit 
and in Corporate Finance and Administration has 
remained stable over the past five years at 8% after 
increasing from a low of 4% in 2010. 
• The proportion of people employed in Corporate 
Finance and Administration has increased by two 
percentage points from 10% to 13% in the past five 
years. 
• The proportion of people employed in IT has increased 
by three percentage points from 11% to 14%. 
CHART 79: DIRECT EMPLOYMENT BY STAFF SEGMENT 
(2014-2019)
Investment management                    Operations and fund administration
Business development and client services
Compliance, legal and audit
Corporate ﬁnance and corporate administration
IT systems                        Other sector
2014                 2015                  2016                   2017                 2018                  2019
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Table 6 shows that the type of activity undertaken in 
different locations differs widely: 
• London is the main centre of investment 
management activity and business development. 
• Operations activities and finance are more important 
outside London. There is a marked contrast with 
Scotland in this regard, also seen in IT roles.

99
INVESTMENT MANAGEMENT SURVEY 2019-20 | OPERATIONAL AND STRUCTURAL ISSUES 
6
TABLE 6: DISTRIBUTION OF INVESTMENT MANAGEMENT 
JOBS BY REGION
	
	
	Elsewhere 
	
London 	 Scotland 	 in the UK
Investment Management 
of which	
27%	
17%	
11%
Investment management 
(asset allocation and 
stock selection)	
67%	
70%	
66%
Research, analysis	
26%	
24%	
27%
Dealing	
7%	
7%	
7%
Operations and Fund 
Administration of which	
14%	
29%	
34%
Investment transaction 
processing, settlement, 
asset servicing	
46%	
14%	
14%
Investment accounting, 
performance measurement, 
client reporting	
32%	
32%	
30%
Other fund administration 
(incl. CIS transfer agency, 
ISA administration etc.)	
21%	
54%	
55%
Business Development 
and Client Services 
of which	
19%	
15%	
14%
Marketing, sales, 
business development	
67%	
36%	
73%
Client services	
33%	
64%	
27%
Compliance, Legal 
and Audit of which	
9%	
6%	
8%
Compliance	
37%	
44%	
47%
Risk	
36%	
27%	
26%
Legal	
21%	
22%	
23%
Internal audit	
7%	
7%	
5%
Corporate Finance and 
Corporate Administration 
of which	
11%	
14%	
12%
Corporate finance	
41%	
46%	
50%
HR, training	
26%	
30%	
19%
Other corporate 
administration	
33%	
23%	
31%
IT Systems	
13%	
15%	
18%
Other	
6%	
4%	
3%
INDUSTRY CONCENTRATION
Chart 80 illustrates that the investment management 
industry in the UK continues to comprise a small 
number of very large firms but a long tail of medium- 
and small-sized organisations. This can be seen in the 
difference between the mean value of assets under 
management by an IA member firm and the median 
value. The median value of assets under management 
stands at £10 billion of assets but the mean average 
value is much higher. This indicates that there is a 
relatively small number of members managing large 
volumes of assets under management.
AVERAGE ASSETS UNDER MANAGEMENT 
AT JUNE 2019
CHART 80: IA MEMBER FIRMS RANKED BY UK ASSETS 
UNDER MANAGEMENT (JUNE 2019)
1,400
1,200
1,000
800
600
400
200
0
£bn
MEDIAN:  
£10   
BILLION
MEAN:   
£51    
BILLION

THE INVESTMENT ASSOCIATION
100
Table 7 looks at how the distribution of assets under 
management has changed over time. As we saw in 
Chart 80 there is huge difference in scale between 
the largest firms within the industry and the smallest 
firms. However, the number of firms with over £50 
billion in assets has remained unchanged over the last 
few years, hence the falling proportions. 
The majority (45%) of IA members fall in the £1-
15 billion of assets under management category, 
though this proportion has fallen in 2019. There is 
still significant competition and demand for smaller 
firms, which might be more likely to offer specialist 
investment services. 2019 saw an increase in the 
proportion of firms with less than £1 billion under 
management reaching 13%. There was also a relatively 
significant increase in the proportion of firms in the 
mid-sized category of £15-25 billion reaching 12%, a 
four percentage point increase on 2018.
The investment management industry in the UK 
remains relatively unconcentrated. The five largest 
firms represented 43% of assets and the ten largest 
firms represent 58% of industry assets. Both figures 
are marginally up year on year, though still slightly 
lower than the highs of 2017. A figure of less than 
TABLE 7: ASSETS MANAGED IN THE UK BY IA MEMBERS BY FIRM SIZE
	
	
	
No. of firms 	
No. of firms	
No. of firms	
No. of firms	
No. of firms	
No. of firms
AUM	
(June 2014) 	
(June 2015)	
(June 2016) 	
(June 2017) 	
(June 2018)	
(June 2019) 
>£100bn	
8%	
10%	
11%	
12%	
12%	
11%
£50-100bn	
10%	
10%	
9%	
9%	
8%	
7%
£25-50bn	
10%	
10%	
11%	
10%	
14%	
11%
£15-25bn	
10%	
10%	
8%	
10%	
8%	
12%
£1-15bn	
48%	
50%	
51%	
47%	
49%	
45%
<£1bn	
15%	
11%	
10%	
13%	
10%	
13% 
Total	
 100%	
100%	
100%	
100%	
100%	
100% 
1,000 on the Herfindahl-Hirschmann Index, a standard 
measure of competition, represents low concentration. 
The value for the investment management industry 
stands at just 542 (see Chart 81). As we saw in Table 7, 
we continue to see increases in the small and mid-
sized firm categories. 
CHART 81: MARKET SHARE OF LARGEST FIRMS BY UK 
ASSETS UNDER MANAGEMENT VS. HHI (JUNE 2009-2019)
Top 5 (LH)                  Top 10 (LH)                    HHI (RH)
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
70%
60%
50%
40%
30%
20%
10%
0%
2009   2010  2011  2012  2013  2014  2015   2016  2017  2018  2019

101
INVESTMENT MANAGEMENT SURVEY 2019-20 | OPERATIONAL AND STRUCTURAL ISSUES 
Chart 82 shows the ten largest firms in the UK, 
measured by UK assets under management supplied 
to the IA in response to the Survey questionnaire.34 
The top ten includes a mix of active managers and 
those also offering indexing. There is a wide variety 
of group types in the top ten, including independent 
asset managers, as well as managers that are part of 
a larger insurance group, or bank. Unsurprisingly, with 
institutional clients representing 80% of assets under 
management, the assets of the top ten managers are 
dominated by institutional assets.
As the difference between UK and global assets shows, 
a number of the largest asset managers are primarily 
UK focused, whereas others have a much wider global 
footprint. 
CHART 82: TOP TEN FIRMS BY UK-MANAGED AND GLOBAL 
ASSETS UNDER MANAGEMENT35  
UK-managed assets under management
Global assets under management
BlackRock Investment
Management (UK) Ltd
Legal and General
Investment Management
Insight Investment
Management (Global) Ltd
Aberdeen Standard
Investments
Schroder Investment
Management Ltd
M & G Investments
Limited
UBS Asset Management
Limited
State Street Global
Advisors UK Ltd
J.P. Morgan Asset
Management
Aviva Investors
0             1,000           2,000           3,000           4,000           5,000          6,000
£bn
5,608
986
638
661
427
487
287
500
270
275
257
1,196
682
1,289
257
2,352
253
1,530
233
346
34 Based on headline data supplied to The IA in response to the Survey Questionnaire
35 Assets under management figures may reflect the value of wider economic exposure managed for clients in addition to securities within 
segregated or pooled portfolios.
BOUTIQUES
The IA membership contains a number of boutique 
managers. The definition of a boutique firm is not 
based purely on the size of the firm. There are four 
broad criteria:
• Being independently owned
• Managing assets of less than £5.5 billion 
• Providing a degree of investment specialisation
• Self-definition
According to these criteria the number of boutiques 
within the IA membership remained stable at 22 in 
2019.
BASED ON IA CRITERIA
14%  
OF IA MEMBER FIRMS ARE 
BOUTIQUE INVESTMENT 
MANAGERS

THE INVESTMENT ASSOCIATION
102
ASSET MANAGER OWNERSHIP
Over the past decade the shift towards ownership by 
firms with a headquarters in the US has continued 
although most of the shift occurred in the first half 
of the decade. In fact since 2014, the proportion of 
firms by AUM owned by a US headquartered company 
has remained stable at around 46%. UK-owned asset 
managers now account for 41% of assets managed 
in the UK, down from 48% in 2009. Assets managed 
by European-owned firms remain at a relatively low 
proportion of total assets managed in the UK, at 
around 10%. 
CHART 83: ASSETS UNDER MANAGEMENT BY REGION OF 
PARENT GROUP HEADQUARTERS- TEN YEAR COMPARISON
United Kingdom                           North America                         Europe
Asia-Paciﬁc                                    Other
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0
2009                                                            2019
Over the same period, there has been a fundamental 
shift in the ownership of investment management 
companies. The biggest shift is the increase in 
independent asset managers from 32% to 42%. At the 
same time the proportion of assets managed by firms 
with an insurance parent has fallen from 32% to 25% 
and the proportion of assets managed by firms owned 
by a retail bank has fallen from 9% to 2%. 
CHART 84: BREAKDOWN OF UK ASSETS UNDER 
MANAGEMENT BY PARENT TYPE– TEN YEAR COMPARISON
Investment/Fund Manager                Insurance company              Investment bank
Retail bank                                                 Pension fund manager               
Other (incl. custodian banks)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2009                                                              2019

103
INVESTMENT MANAGEMENT SURVEY 2019-20 | APPENDICES
	 APPENDICES
Appendices

TOTAL 
 
 
 
 

Assets under management in the UK (£m) 
8,510,445 
 
 
Segregated or pooled (%)  
 
Directly invested on a segregated basis   
54.7%
Managed on a pooled basis  
45.3%
Active or passive (%) 
Actively managed 
70.5%
Passively managed 
29.5%
Asset allocation (%) 
Equities of which: 
38.3%
UK 
29.3%
Europe (ex UK) 
22.8%
North America 
21.9%
Pacific (ex Japan) 
9.3%
Japan 
5.5%
Latin America 
1.3%
Africa 
0.5%
Emerging market 
8.0%
Other 
1.4%
Fixed Income of which:2 
31.6%
UK Government 
13.4%
Sterling corporate 
16.9%
UK index-linked 
12.5%
Other UK 
7.0%
Overseas govt 
17.7%
Non-sterling corporate 
18.8%
Non-sterling other 
13.7%
Cash/Money market 
5.5%
Property 
2.3%
Other 
22.4%
THE INVESTMENT ASSOCIATION
104
APPENDIX 1
SUMMARY OF ASSETS UNDER MANAGEMENT 
IN THE UK
1
1  This includes all assets under management in this country, regardless of where clients or funds are domiciled.

INVESTMENT MANAGEMENT SURVEY 2019-20 | APPENDIX ONE
105
Appendices
 
 
 
 
INSTITUTIONAL
Pension 
Public 
 
 
Sub- 
In-house Third party 
Other 
ALL 
RETAIL 
PRIVATE
funds 
sector 
Corporate Non-profit 
advisory insurance insurance 
institu- 
INSTITUTIONAL 
 
CLIENT
 
 
 
 
 
 
 
tional
3,670,887 418,108 514,682 
111,101 
411,264 443,955 644,018 512,261 
6,726,276 
1,588,234 
195,936
43.1% 
4.9% 
6.0% 
1.3% 
4.8% 
5.2% 
7.6% 
6.0% 
79.0% 
18.7% 
2.3%

TOTAL 
 
 
 

Total Institutional Market (£m) 
3,964,468 
 
 
 
 
Assets directly invested on a segregated basis   
64.8% 
Assets managed on a pooled basis  
35.2% 
Active or passive (%) 
Actively managed 
71.4% 
Passively managed 
28.6% 
Multi-asset, LDI or Specialist (%)  
 
Multi-asset 
13.5% 
LDI (notional) 
 36.9% 
Single-asset / specialist of which: 
49.6% 
Equities  
35.0% 
Fixed Income 
42.4% 
Cash/Money Market 
 9.5% 
Property 
 6.1% 
Other 
 6.9% 
2  This includes UK institutional client mandates, regardless of where assets are managed in the world.
106
APPENDIX 2
SUMMARY OF DATA FROM THE 
UK INSTITUTIONAL MARKET
2

107
INVESTMENT MANAGEMENT SURVEY 2019-20 | APPENDIX TWO
Appendices
 
Pension funds
Corporate 
Local 
Other 
Public
 
Corporate 
Non-profit 
Sub- 
In-house 
Third party 
Other
 
government 
 
sector 
 
 
advisory 
insurance 
insurance institutional
2,253,317 
242,014 
97,819 
30,664 
113,309 
37,669 
142,062 
419,832 
466,864 
160,920
56.8% 
6.1% 
2.5% 
0.8% 
2.9% 
1.0% 
3.6% 
10.6% 
11.6% 
4.1%
65.0% 
42.0% 
24.5% 
59.1% 
41.9% 
54.4% 
38.9% 
71.7% 
88.3% 
77.3%
35.0% 
58.0% 
75.5% 
40.9% 
58.1% 
45.6% 
61.1% 
28.3% 
11.7% 
22.7%
63.7% 
58.9% 
49.6% 
94.2% 
90.6% 
76.8% 
62.1% 
93.3% 
91.7% 
85.0%
36.3% 
41.1% 
50.4% 
5.8% 
9.4% 
23.2% 
37.9% 
6.7% 
8.3% 
15.0%
5.9% 
7.6% 
38.2% 
24.2% 
3.2% 
31.8% 
11.0% 
7.4% 
58.9% 
1.4%
59.7% 
16.5% 
24.9% 
18.8% 
1.6% 
2.0% 
0.0% 
0.1% 
3.6% 
14.8%
34.4% 
75.9% 
36.9% 
57.1% 
95.3% 
66.2% 
89.0% 
92.5% 
37.4% 
83.8%
33.0% 
62.6% 
58.9% 
15.7% 
18.2% 
55.6% 
63.2% 
25.3% 
30.7% 
22.0%
46.1% 
25.5% 
30.4% 
35.1% 
49.1% 
12.1% 
31.5% 
54.4% 
56.6% 
5.6%
3.5% 
2.6% 
5.9% 
27.3% 
19.8% 
3.1% 
0.1% 
8.4% 
4.4% 
64.1%
4.3% 
6.5% 
3.6% 
6.7% 
9.1% 
1.7% 
0.8% 
12.0% 
4.0% 
6.3%
13.1% 
2.8% 
1.1% 
15.3% 
3.8% 
27.6% 
4.4% 
0.0% 
4.3% 
1.8%

THE INVESTMENT ASSOCIATION
108
APPENDIX 3
IA SECTOR CLASSIFICATION SCHEMATIC
PRIMARY OUTCOME
• UK All Cos;
• UK Smaller Cos;
• Japan;
• Japanese 
Smaller Cos;
• Asia Pac inc Japan;
• Asia Pac ex Japan;
• China/Greater 
China;
• North America;
• North American 
Smaller Cos;
• Europe ex UK;
• Europe inc UK;
• European 
Smaller Cos;
• Global;
• Global Emerging 
Markets
ASSET CLASS
CASH / 
LIQUIDITY
FIXED 
INCOME
EQUITY
MIXED / 
MULTI 
ASSET
OTHER
UNCLASSIFIED
GROWTH
INCOME
SPECIALIST
• Mixed Investment  
0-35% Shares; 
• Mixed Investment 
20-60% Shares; 
• Mixed Investment 
40-85% Shares; 
• Flexible 
Investment
• UK Gilts; 
• UK Index Linked Gilts;
• £ Corp Bond;
• £ Strategic Bond;
• £ High Yield;
• Global Bonds;
• Global Emerging Market Bonds 
– Blended;
• Global Emerging Market Bonds 
– Hard Currency;
• Global Emerging Market Bonds 
– Local Currency
EQUITY
GROWTH
• UK Equity 
Income;
• Global 
Equity 
Income
EQUITY
INCOME
FIXED 
INCOME
MIXED 
ASSET
GROWTH
MIXED 
ASSET
INCOME
CAPITAL 
PROTECTION
SPECIALIST
EQUITY
SPECIALIST
OTHER
TARGETED 
ABSOLUTE 
RETURN
VOLATILITY 
MANAGED
• ST Money 
Market;
• STD Money 
Market
CAPITAL 
PROTECTION
• UK Equity 
and Bond 
Income
• UK Direct 
Property;
• Property 
Other;
• Specialist   
• Technology and 
Telecommunications

INVESTMENT MANAGEMENT SURVEY 2019-20 | APPENDIX FOUR
109
APPENDIX 4
NOTABLE M&A DEALS IN THE UK ASSET 
MANAGEMENT SECTOR (2009-JUNE 2020)
Appendices
ACQUIRER	
PURCHASE
AllianceBernstein 
 
AnchorPath
AXA 
 
Increased equity holding in Capzanine
BlackRock 
 
eFront
Bluebay 
 
Spins out Arcmont Asset Management
BNP Paribas 
 
Purchase of 22.5% of Allfunds
Brewin Dolphin 
 
Epoch Wealth Management
 
 
Investec’s Wealth Management Business in Ireland
 
 
Mathiesen Consulting
Brooks Macdonald 
 
Lloyds Investment Fund Managers
 
 
Cornelian Asset Managers Group Limited
Charles Stanley 
 
Myddleton Croft
F&C 
 
Thames River Capital
Franklin Templeton  
 
Legg Mason
 
 
Material stake in Embark Group
Goldman Sachs 
 
S&Ps Model Portfolio business
Hargreaves Lansdown 
 
£765m stake of retail ISA assets from JPM Chase
Invesco 
 
RedBlack
Jupiter Asset Management 
 
Merian Global Investors
 
 
Minority stake in NZS Capiak
Liontrust 
 
Architas
 
 
Neptune Investment Management
M&G 
 
Ascentric
Merian Global Investors 
 
Kestrel Investment Partners multi-asset business
Mitsubishi UFG Trust and Banking  
First State Investments
Premier Asset Management 
 
Miton Group
Quilter 
 
Charles Derby 
 
 
Lighthouse
Rathbone 
 
Personal Injury and Court of Protection business of Barclays Wealth
Sanlam 
 
Astute Wealth Management
 
 
Thesis Asset Management
Schorders 
 
Thirdock
 
 
Majority stake in BlueOrchard Finance
SJP 
 
Havest Financial Services
Standard Life Aberdeen 
advice firm- 1825 
 
Grant Thornton advice code
Stonehage Fleming 
 
Cavendish Asset Management
Sumitomo Mitsui Financial Group  
TT International
Waverton Investment Management 
Timothy James & Partners
2019-2020

THE INVESTMENT ASSOCIATION
110
 ACQUIRER	
PURCHASE
Alliance Bernstein 
 
Autonomous Research
Allianz GI 
 
Sound Harbour Partners
Amundi 
 
Mirae Global Investments Taiwan
 
 
Anatech
Candriam 
 
Tristan Capital Partners (strategic partnership)
Federated Investors 
 
Hermes Investment Management (majority stake)
Franklin Templeton 
 
Benefit Street Partners
 
 
Edinburgh Partners
FundRock 
 
SEB Fund Services Luxembourg
Goldman Sachs 
 
Aptitude Investment Management
 
 
Rocaton Investment Advisors
Impax Asset Management 
 
Pax World Management LLC
Invesco 
 
Oppenheimer Funds
 
 
Intlliflow
Jupiter 
 
Merger of retail and wealth management sales teams
Lyxor ETF 
 
Commerzbank ETF Arm
Man GLG 
 
Bond Fund from Salnlam
Mellon 
 
Walter Scott & Partners
Muzinich 
 
Springrowth SGR
Natixis 
 
MB Credit
Nomura Asset Management 
 
8 Securities (majority stake)
Pimco 
 
Gurtin Municipal Bond Management
Rathbones 
 
Spears and Jeffery
Seven Investment Management   
TCAM
2018

111
INVESTMENT MANAGEMENT SURVEY 2019-20 | APPENDIX FOUR
Appendices
 ACQUIRER	
PURCHASE
Amundi Group 
 
Pioneer Investments
Blackrock 
 
Cachematrix Holdings
 
 
First Reserve Energy Infrastructure Funds
 
 
Scalable Capital (minority stake)
BNP Paribas Asset Management  
Gambit Financial Solutions (majority stake)
Brewin Dolphin 
 
Duncan Lawrie Asset Management
Canada Life Group (UK) 
 
Retirement Advantage
Close Brothers 
 
Adrian Smith and Partners
Crux Asset Management  
 
Oriel global and European funds from City Financial
FundRock 
 
Fund Partners
LGIM 
 
Canvas
Link Group 
 
Capita Asset Services
Lovell Minnick Partners/
Existing Management Team 
 
BNY Mellon Investment Management (CentreSquare Investment Management  
 
Real Asset Boutique)
Natixis Global Asset Management 
Investors Mutual Ltd
Nikko Asset Management 
 
ARK Investment Management (minority stake)
Principal Global Investors 
 
Internos Global Investors
RWC 
 
Pensato Capital
Sandaire 
 
Joint venture with Delancey
Schroders 
 
Adveq Holdings AG
 
 
Alonquin
SJP 
 
HJP Independent Financial Advisers
Standard Life Investments 
 
Aberdeen Asset Management (merger)
Stonehage Fleming 
 
OmniArte
Swiss Re 
 
LGIM with profits business
TA Associates 
 
Old Mutual Global Investors (single strategy funds)
Thesis Asset Management 
 
Cambridge Fund Managers
2017

ACQUIRER	
PURCHASE
Aviva 
Friends Life
BNY Mellon 
Cutwater Asset Management
Henderson 
90 West (increased holding to 100%)
 
Perennial Fixed Interest Partners/Perennial Growth Management
Broadstone 
Blythwood
Brooks Macdonald 
Levitas Investment Management Services Ltd
Legal and General 
Investment Management 
Aerion
GAM 
Singleterry Mansley Asset Management
Maitland 
Phoenix Fund Services
Stonehage 
Fleming Family
Threadneedle 
Columbia (merger)
Vontobel 
TwentyFour
2015
 ACQUIRER	
PURCHASE
Aberdeen 
Arden Asset Management, Parmenion Capital, 
Aegon 
Cofunds
AJ Bell 
Indexx Markets Ltd, Allium Capital
Alliance Bernstein 
Ramius Alternative Solutions
Allianz 
Rogge Global Partners
Amundi 
Kleinwort Benson Investors
Columbia Threadneedle 
Emerging Global Advisors
Courtiers 
JRH Asset Management
Franklin Templton 
AlphaParity
Henderson Global Investors 
Janus
Legal and General 
Investment Management 
Aegon annuity portfolio
Legg Mason 
EnTrust Capital, Clarion Partners, Financial Guard
Liontrust  
Alliance Trust Investment
Momentum 
London and Capital adviser business
Standard Life 
AXA portfolio services
State Street Global Advisors 
GE Asset Management
Stonehage Fleming  
FF&P Wealth Planning
2016
THE INVESTMENT ASSOCIATION
112

INVESTMENT MANAGEMENT SURVEY 2019-20 | APPENDIX FOUR
113
Appendices
 ACQUIRER	
PURCHASE
Aberdeen 
Scottish Widows Investment Partnership
Bank of Montreal 
F&C
Broadstone 
Blythwood
Brooks Macdonald 
Levitas Investment Management Services Ltd
Family Investments 
Engage Mutual
GAM 
Singleterry Mansley Asset Management
Legg Mason 
Martin Currie
Octopus 
MedicX
Rathbones 
Jupiter Asset Management Limited’s private client and charity investment 
management business
River and Mercantile 
P-Solve (merger)
Standard Life 
Ignis Asset Management
Thomas Miller  
Broadstone Wealth Management
2014
 ACQUIRER	
PURCHASE
Aberdeen 
Artio Global Investors 
 
Scottish Widows Investment Partnership
Aviva 
Solar portfolio from Ecovision Renewable Energy
Barings 
SEI Asset Korea (SEIAK)
BlackRock 
Credit Suisse ETF Business
Bank of Montreal 
F&C
Henderson 
H3 Global Advisers
 
Northern Pines Capital (50%)
 
90 West (33%)
Liontrust 
North Investment Partners
Miton 
PSigma
PSigma 
Axa Framlington private client business
Royal London 
Co-Operative (Insurance and asset management businesses)
Schroders 
Cazenove Capital Management 
 
STW Fixed Income
Standard Life Wealth 
Private client division of Newton
2013

THE INVESTMENT ASSOCIATION
114
 ACQUIRER	
PURCHASE
BT 
JO Hambro
Close 
Cavanagh Wealth Management
Close 
Allenbridge Group
Cyrun Finance 
SVM Asset Management 
Franklin Templeton 
Rensburg
Henderson 
Gartmore
Investec 
Evolution
Liontrust 
Occam
Principal 
Origin 
Punter Southall 
Brewin Dolphin’s corporate pension arm
Royal London 
Royal Liver
SGBP Hambros 
Barings’ private client business
Threadneedle 
Liverpool Victoria
Williams de Broe 
BNP Paribas’ private client business
2011
 ACQUIRER	
PURCHASE
Brooks Macdonald 
Spearpoint
Bridgepoint & Quilter  
Quilter (MBO)
Broadstone 
UBS Wealth’s corporate pension arm
Franklin Templeton 
K2 Advisors
Goldman Sachs 
Dwight
Insight 
Pareto
Legg Mason 
Fouchier Partners
Liontrust 
Walker Crips 
Natixis 
McDonnell 
Punter Southall 
PSigma 
Rathbone 
Taylor Young
2012

INVESTMENT MANAGEMENT SURVEY 2019-20 | APPENDIX FOUR
115
Appendices
 ACQUIRER	
PURCHASE
Aberdeen 
RBS’ multimanager and alternatives business
Alpha Real Capital 
Close Brothers’ property fund management business
AMG 
Artemis
Aviva Investors 
River Road
Close 
Chartwell Group
F&C 
Thames River Capital 
Investec 
Rensburg Sheppards
Man Group 
GLG Partners
Marlborough 
SunLife Financial of Canada’s funds
Schroders 
RWC Partners (49%)
State Street 
Bank of Ireland
2010
 ACQUIRER	
PURCHASE
BlackRock 
BGI
 BNP Paribas 
Fortis
 BNY Mellon 
Insight
Henderson 
New Star
Ignis 
Axial
Invesco 
Morgan Stanley’s retail fund business
Marlborough 
Apollo
Neuberger Berman Group 
Management buyout of Lehman asset management business
Rathbone 
Lloyds’ RBS PMS client portfolio and two private client portfolios
Sumitomo Trust 
Nikko
2009

THE INVESTMENT ASSOCIATION
116
APPENDIX 5
DEFINITIONS
CORPORATE CLIENTS
Institutions such as banks, financial corporations, 
corporate treasuries, financial intermediaries and 
other private sector clients. Investment management 
services for fund products operated by financial 
corporations are included under ‘Sub-advisory’.
ESG INTEGRATION
The systematic and explicit inclusion by investment 
managers of environmental social, and governance 
factors into traditional financial analysis.
FUND OF FUNDS
Funds whose investment objective is fulfilled by 
investing in other funds rather than investing directly 
into assets such as cash, bonds, shares or property. 
These may also referred to as ‘multi-manager 
products’.
IMPACT-DRIVEN INVESTMENT
This approach seeks to enhance value by proactively 
screening for businesses that are seeking to work 
for the benefit of all their stakeholders, not just 
shareholders or owners.   
IN-HOUSE INSURANCE CLIENTS
Refers to assets that insurance-owned investment 
management firms manage for their parent company 
or an insurance company within the parent group.
INVESTMENT FUNDS 
All pooled and listed vehicles regardless of the 
domicile of the client or fund (ie. unit trusts, investment 
companies with variable capital including ETFs, 
contractual funds, investment trusts, and hedge funds) 
but it does not include life or insurance funds. 
LIABILITY DRIVEN INVESTMENT (LDI)
Defined as an approach where investment objectives 
and risks are calculated explicitly with respect to 
individual client liabilities.
MULTI-ASSET MANDATE
Also called ‘balanced’, these types of mandate invest 
across a range of asset classes and geographies 
without a specific focus on a particular universe.
NON-PROFIT CLIENTS
Includes charities, endowments, foundations and other 
not for profit organisations.
NORMS-BASED SCREENING
Screening of investments against minimum standards 
of business practice based on international norms.
‘OTHER’ CLIENTS 
Assets managed on behalf of client types that cannot 
be classified under any other category as well as 
unidentifiable client types, eg. closed-ended funds or 
institutional pooling vehicles.
OVERSEAS BONDS 
Include overseas government bonds as well as debt 
denominated in overseas currencies.
OVERSEAS CLIENT ASSETS
Assets managed on behalf of non-UK clients. Includes 
assets delegated to the firm from overseas offices and 
assets directly contracted in the UK.
PENSION FUND CLIENTS
Incorporates both defined benefit (DB) and defined 
contribution (DC) provision, where the respondent 
has a relationship with a pension fund, irrespective 
of type. Where the DC provision is operated via an 
intermediary platform, particularly a life company 
structure wrapping the funds, the assets are reflected 
in ‘Insurance’.
PUBLIC SECTOR CLIENTS
Encompasses central banks, supranational bodies, 
public sector financial institutions, governmental 
bodies, public treasuries and sovereign wealth funds 
as well as the non-pension assets of local authorities 
and other public sector clients. 
PRIVATE CLIENTS 
Comprise assets managed on behalf of high-net-worth 
and ultra-high-net-worth individuals as well as family 
offices.

117
INVESTMENT MANAGEMENT SURVEY 2019-20 | APPENDIX FIVE
Appendices
POOLED
Comprises investment vehicles operated by a manager 
for several clients whose contributions are pooled. It 
also includes assets in segregated portfolios that are 
held indirectly via pooled vehicles managed by the 
respondent.
RETAIL 
Includes investment into unit trusts, open-ended 
investment companies (OEICs) and other open-
ended investment funds irrespective of domicile. 
It incorporates assets sourced through both 
intermediated sales (ie. made through fund platforms, 
supermarkets and other third parties) and direct retail 
sales. It does not include life-wrapped funds, which are 
classified under ‘Third Party Insurance’.
RESPONSIBLE INVESTMENT 
An approach where the investor avoids investing in 
businesses that are harming people or the planet, such 
as oil, tobacco, or weapons production.   
SEGREGATED
Assets directly invested within segregated portfolios, 
and managed on behalf of one client. This would also 
include mandates run on behalf of a single pooled 
vehicle (eg. a ‘pooled’ insurance fund run for an 
insurance parent company).
SINGLE-ASSET
Also called ‘specialist’, these types of mandate are 
overwhelmingly focused on one asset class, and therein 
usually a specific sub-type (either geographic or other; 
eg. a US equity mandate or an index-linked 
gilt mandate).
STERLING CORPORATE DEBT 
Exposure to Sterling-denominated debt, irrespective of 
whether it is issued by UK or overseas companies.
SUB-ADVISORY
Business as part of which the respondent provides 
investment management services to third party fund 
products. It may therefore include business that is 
institutional to the respondent, but may ultimately be 
retail (eg. ‘white-labelled’ funds or manager of manager 
products).
SUSTAINABILITY-THEMED INVESTING
Investment in themes or assets specifically related 
to sustainability (for example clean energy, green 
technology, or sustainable agriculture).
THIRD PARTY INSURANCE CLIENTS
Assets sourced from third party insurance companies 
(ie. from outside the respondent’s group), where the 
mandates are seen as institutional. It includes both 
unit-linked assets (ie. funds manufactured by the 
respondent and distributed with the respondent’s brand 
through a life platform) and other third party assets.
UK ASSETS UNDER MANAGEMENT
Assets where the day-to-day management is 
undertaken by individuals based in the UK. This 
includes assets managed by the firm in the UK whether 
for UK or overseas clients contracted with the firm. It 
also includes assets delegated to the firm’s UK-based 
asset managers by either third party asset managers or 
overseas offices of the company or group. With respect 
to fund of funds and manager of manager products, the 
figure only includes the size of the underlying funds 
managed by the firm’s UK-based managers
UK FUND MARKET
This primarily covers UK-domiciled authorised unit 
trusts and OEICs, which are by the far the largest part of 
the UK retail fund market, but also used by institutional 
investors. A small but growing part of the fund market is 
represented by funds domiciled overseas though often 
with portfolio management performed in the UK. There 
are also some UK-domiciled funds that are sold into 
overseas markets. 
UK INSTITUTIONAL CLIENT MARKET
Covers mandates or investment in pooled funds by UK 
institutional clients. We analyse this market on the 
basis of client domicile, not domicile of funds invested 
in or location of asset manager. This is in contrast to the 
analysis of UK assets under management, which covers 
assets managed in the UK regardless of domicile of 
funds or clients for whom firms manage money.

APPENDIX 6
SURVEY RESPONDENTS
Aberdeen Standard Investments
Aberforth Partners LLP
AllianceBernstein Limited
Allianz Global Investors
Amundi London Branch
Aviva Investors
AXA Investment Management
Baillie Gifford & Co
Baring Asset Management Ltd
BlackRock Investment Management (UK) Ltd
BlueBay Asset Management LLP
Brooks Macdonald Asset Management
Candriam
Carmignac Gestion
CCLA
City of London Investment Management Company Ltd
Columbia Threadneedle
Courtiers Asset Management Limited
Crux Asset Management
Edinburgh Partners
EFG Asset Management (UK) Limited
FIL Investment Management Limited
Franklin Templeton Fund Management Limited
Genesis Investment Management LLP
Goldman Sachs Asset Management International
Guinness Asset Management
Hermes Investment Management
HSBC Global Asset Management (UK) Limited
Independent Franchise Partners LLP
Insight Investment Management (Global) Ltd
Invesco
J O Hambro Capital Management Limited
J.P. Morgan Asset Management
Janus Henderson Investors
Lazard
Legal and General Investment Management
Lindsell Train
Link Asset Service
M & G Investments Limited
Man Fund Management UK Limited
Margetts Fund Management Ltd
Martin Currie Fund Management Ltd
McInroy & Wood Ltd
Morgan Stanley UK Ltd
Newton Investment Management Limited
Ninety One
Odey Asset Management LLP
Pinebridge
Polar Capital LLP
Pyrford International Ltd
Quilter Fund Management
Rathbone Unit Trust Management
Royal London Asset Management
Ruffer
Santander Asset Management 
Sarasin & Partners LLP
Schroder Investment Management Ltd
Scottish Friendly Asset Managers Ltd
Slater Investments Ltd
Smith & Williamson
State Street Global Advisors UK Ltd
SVM  Asset Management
T. Rowe Price International Ltd
Trinity Street Asset Management
Troy Asset Management
TT International
TwentyFour Asset Management LLP
UBS Asset Management (UK) Limited
Valu-Trac Investment Management Ltd
Vanguard Asset Management Limited
Veritas Investment Management
WAY Fund Managers Limited
THE INVESTMENT ASSOCIATION
118

INVESTMENT MANAGEMENT SURVEY 2019-20 | APPENDIX SEVEN
119
Appendices
APPENDIX 7
INTERVIEW AND ROUNDTABLE PARTICIPANTS
Aberdeen Standard Investments
AllianceBernstein Limited
Aviva Investors
Baillie Gifford & Co
BlackRock Investment Management (UK) Ltd
Carmignac Gestion
FIL Investment Management Limited
J.P. Morgan Asset Management
Legal & General Investment Management
Natixis Investment Management
Newton Investment Management Limited
Ninety One
Schroder Investment Management Ltd
State Street Global Advisors UK Ltd
Vanguard Asset Management Limited

The Investment Association
Camomile Court, 23 Camomile Street, London, EC3A 7LL
www.theia.org   
       @InvAssoc
September 2020
© The Investment Association (2020). All rights reserved.
No reproduction without permission of The Investment Association.