This content is from: Corner Office

Investors Shun Large British Firms

Investors are opting for asset managers in North America and Continental Europe at the expense of those in the U.K. — with one major exception.

  • Joe McGrath

The decline in assets managed by the U.K.’s largest fund groups accelerated in 2016 as firms’ assets under management fell by 4.5 percent over the year, according to new data from Willis Towers Watson on the 500 largest investment managers worldwide.

U.K.-based firms’ assets totaled $6.3 trillion at the end of December 2016, down from $6.6 trillion in 2015 and $6.8 trillion in 2014, according to the report.

The region’s investment firms have given up market share over the past decade while American shops have snapped it up. In 2007, U.K. firms in the top 500 controlled 11.3 percent of global assets and U.S. managers held 41.6 percent. By the end of last year, the respective split was 7.8 percent to 53.5 percent.

But the news is not all dire for U.K. fund management.

London-based Legal & General Group made one of the steepest ranking climbs on Willis Towers Watson’s list, rising from 27th in 2011 to overtake HSBC as the top U.K. manager and 16th largest worldwide. HSBC, in contrast, dropped from 13th to 22nd over the past five years, although it retained roughly the same amount of assets ($847 billion versus $831 billion in 2016).

[II Deep Dive: U.K.’s Insight Investment Is Taking on the U.S. Bond Giants]

Furthermore, assets under management in the U.K. were actually up across firms of all sizes, according to the Investment Association — a trade group representing U.K. asset managers. The association’s annual asset management survey, released in September, put the U.K. total at £6.9 trillion ($9.1 trillion) as at the end of 2016, up from £5.7 trillion ($7.52 trillion) in 2015. A spokesperson noted that the survey excluded hedge fund and commercial real estate assets, and reported in Sterling as opposed to U.S. dollars.

Assets at the world’s largest managers grew globally by 5.8 percent during 2016, according to the Willis Towers Watson report, with North American groups showing the largest increase at 7.7 percent. Europe as a whole, including the U.K., saw assets grow by 2.8 percent while Japanese managers had modest 0.4 percent growth.

Globally, mid-tier managers — ranked between 51st and 250th — continue to feel their place in the market squeezed. In 2007, this cohort managed 33.7 percent of all assets, which gradually shrank to 28.8 percent by the end of 2016. Their loss has been giant firms’ gain. Top 20 managers’ asset share climbed from 37.5 percent in 2007 to 42.3 percent at the end of last year.

Firms owned by banks represented seven of the top 20 largest fund firms globally as at the end of 2016. In 2008, bank-owned fund firms held 11 of the top 20 positions. Independent fund firms have increased their presence in the top 20 from six positions in 2008 to holding half by the end of last year.

BlackRock remained world’s largest manager with $5.1 trillion of assets at the close of 2016, according to the report, ahead of Vanguard ($4 trillion), and third-place State Street ($2.47 trillion).