Table of Contents
- Overview
- Catalyst
- Summary
- Methodology
- Executive Summary
- Despite regulatory and financial market challenges, there is broad scope
to increase penetration in the UK collective investments market
- Key issue: Mutual funds vs ETFs - In the short term,mutual funds will
hold their own against ETFs, but the competitive threat is increasing
- Adverse market conditions and regulatory interventions are likely to
deter mutual fund investors
- UK penetration remains below 5%, with higher earners and the elderly
more likely to hold collective investments
- IFAs remain a popular source for advice and service on collective
investments
- Despite contraction in the number of providers, retail investors have
access to an expanded range of funds
- Table of Contents
- Table of figures
- Table of tables
- Special Feature: Mutual Funds vs ETFs - The Battle for Retail Investors
- In the short term, mutual funds will hold their own against ETFs, but the
competitive threat is increasing
- ETFs present a minor, but growing threat to conventional mutual funds
- Demand for ETFs is growing because they offer advantages of cost,
trading flexibility and market access
- UK and EU legislation is also facilitating growth in the ETF market
- Faced with inevitable growth in the ETF market,conventional fund
managers can play offence or defence to shore up their revenue and profit
- Offering ETFs is not the only option
- ETFs do not offer cost advantages to all investors
- For mass market investors, the ability to trade throughout the day
may prove less alluring
- Fund managers should communicate their commitment to the investment
objective and strategy that investors have bought into
- Building and emphasizing corporate investment expertise minimizes the
threat of manager defection
- Improving transparency through more regular, comprehensive reporting
will help investors and advisors to formulate their own judgements about
a fund manager' s integrity
- The best defensive position will be completely transparent
- Market Context
- Adverse market conditions and regulatory interventions are likely to
deter mutual fund investors
- Mutual funds account for a growing percentage of retail investment
assets
- Retail investors in the UK are holding £421 billion worth of collective
investments
- Poor performance has lowered year-on-year growth
- By 2012, investors will have seen growth of just 10% in their mutual
fund portfolios
- Regulatory developments affecting fund management and distribution will
threaten mutual fund managers' revenues and profit
- The FSA wants improved due diligence on mutual funds
- Proposed changes to existing retail distribution models will also
increase operating costs and open the market to greater competition from
substitutes
- Other government interventions may help to boost the UK asset
management industry
- Customers
- UK penetration remains below 5%, with higher earners and the elderly more
likely to hold collective investments
- Retail investors are using mutual funds to access the equity markets
- The majority of unit trusts and OEICs are held outside of ISAs and
PEPs
- Approximately 3% of adults in the UK have unit trusts, with the highest
penetration among those over age 60
- Distribution Channels
- IFAs remain a popular source for advice and service on collective
investments
- Investors buy mutual funds primarily through IFAs
- Tied agents or sales forces account for close to one-third of ISA unit
trusts and OEIC sales
- Clients prefer face-to-face service and advice on their investments
- Mass affluent investors are most likely to go directly to investment
companies or buy directly through fund supermarkets
- Sales efforts should focus most on advisor training and support, since
investors prefer to speak to someone about their investment options
- Wealthier investors are also open to using the financial press to
gather information on investments
- Men are more likely to do-it-themselves than women
- Competitors
- Despite contraction in the number of providers, retail investors have
access to an expanded range of funds
- Industry consolidation continued into 2007
- The top 10 investment trust managers account for 45% of the market, in
terms of assets under management
- 45% of OEIC, PEP and ISA assets are attributed to the top 10 fund
managers
- APPENDIX
- Data
- Definitions
- Independent Financial Advisors (IFAs)
- Gross Retail Sales
- Net Sales
- Share repurchases
- Deposits
- Investment trusts
- ISA
- OEICs
- Unit trusts
- Personal Equity Plan
- Methodology
- Datamonitor' s UK Savings and Investments Database
- Flows Methodology
- Market Share Methodology
- Ipsos MORI data
- Bibliography
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Tables
- Table 1: Number of unit trust and OEIC funds and providers in the UK, %,
2003-07
- Table 2: Overview of the retail savings and investments market, GBPm,
2003-07
- Table 3: Retail mutual funds under management segmented by type of fund
structure, GBPm, 2003-07
- Table 4: Retail mutual funds under management segmented by type of fund
structure, GBPm, 2008-12
- Table 5: Overview of the retail savings and investments market, GBPm,
2008-12
- Table 6: Retail mutual funds under management segmented by type of fund,
GBPm, 2005-07
- Table 7: Unit trust and OEIC funds under management by type, GBP bn,
2003-07
- Table 8: UK households by type of saving and region:Unit Trusts, %,
2002-3 - 2006-7
- Table 9: UK adults by sex, type of saving and age: Unit trusts, %, 2002-3
- 2006-7
- Table 10: UK households by type of saving and total weekly household
income: Unit trusts, %, 2002-2006
- Table 11: Gross retail sales of unit trusts and OEICs in the UK by
distribution channel, %, 2003-07
- Table 12: Gross retail sales of ISA unit trusts and OEICs in the UK by
distribution channel, %, 2003-07
- Table 13: Responses to question: "When you bought your most recent
investment who arranged it for you?", UK adults,segmented by age, 2007
- Table 14: Responses to question: "When you bought your most recent
investment who arranged it for you?", UK adults,segmented by income,
2007
- Table 15: Responses to question: "When you bought your most recent
investment who arranged it for you?", UK adults,segmented by gender,
2007
- Table 16: Responses to question: "When taking out your investment,
which of these methods if any would you use to find information about the
product?", UK adults segmented by age, 2007
- Table 17: Responses to question: "When taking out your investment,
which of these methods if any would you use to find information about the
product?", UK adults segmented by age income,2007
- Table 18: Responses to question: "When taking out your investment,
which of these methods if any would you use to find information about the
product?", UK adults segmented by gender, 2007,
- Table 19: Top 30 investment trust managers by total assets under
management, GBPm, 2007
- Table 20: Ranking of competitors by total funds under management
including OEICs, PEPs and ISAs, GBPm, 2007
- List of Figures
- Figure 1: Growth in retail mutual funds outstrips other asset classes
- Figure 2: Unit trusts & OEICs continue to dominate the retail mutual
funds market
- Figure 3: Mutual fund growth will decelerate between 2008 and 2012
- Figure 4: Growth in investment trust balances will continue to outstrip
unit trusts and OEICs
- Figure 5: Retail investors continue to favor equity mutual funds, but
these now account for a smaller percentage of their portfolios
- Figure 6: 12% of unit trust and OEIC investors' funds is held within ISA
wrappers
- Figure 7: 4% of UK households invest in unit trusts
- Figure 8: Adult males are more likely to hold unit trusts
- Figure 9: Income is positively related to investment in unit trusts
- Figure 10: IFAs continue to dominate sales of unit trusts and OEICs
- Figure 11: Intermediaries' share of the ISA unit trusts and OEICs market
continues to decline
- Figure 12: Overall, IFAs are the preferred channel, but younger investors
are more likely to use a variety of sources
- Figure 13: Fund supermarkets are most used by mass affluent investors
- Figure 14: Men are also far more likely to invest directly through an
asset management firm than women
- Figure 15: Investors of all ages value face-to-face advice; but younger
clients also make use of provider and aggregator websites
- Figure 16: Clients of all income levels prefer to speak to someone
face-to-face for advice
- Figure 17: Women are more reluctant to rely on newspapers or Internet
searches
- Figure 18: The UK market for investment trusts remains highly fragmented
- Figure 19: Invesco Perpetual enjoys a narrow lead in the market for
OIECs, PEPs and ISAs
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