Report: Collective Investments - UK

Issues in the Market
Key issues
Abbreviations
Advertising data
Market in Brief
New sales on the rise in 2009
- Figure 1: Net retail sales of UK-domiciled unit trusts/OEICs, 1999-2009
Low interest rates and rise in the stock market help boost demand
Internal Market Environment and Regulatory Environment
Intermediaries play the key role in distribution
- Figure 2: Proportion of unit trust/OEIC gross retail sales, by distribution channel, 2005-09 (Q2)
Credit crunch leads to market share shake-up
Promotional activity has been tamed by financial crisis
Key consumer research findings
Investment ownership
What consumers are looking for in a long-term investment
Attitudes towards risk
Sources of advice
Internal Market Environment
Key points
Investor sentiment improving but still fragile
- Figure 3: Intended purchases of shares and equity-based unit trusts, government and corporate bonds and bond-based unit trusts and sales of equities and unit trusts, Q3/Q4 2002-Q3/Q4 2009
Investors are generally risk-averse
- Figure 4: Attitudes towards risk, April 2009
Affordability and sufficient knowledge also prominent barriers
- Figure 5: Barriers to buying shares or other stockmarket-based investments, April 2009
Regulatory environment
The Retail Distribution Review
Tories refuse to commit to RDR deadline
Impact of the 18% flat rate of CGT
Tax relief on equity ISAs not all it' s hyped up to be
10% tax credit must be reinstated to make ISAs truly tax-free
EU -- UCITS Directives promote a more competitive marketplace
Tax Elected Funds (TEF) legislation
Positive impact of MiFID at the upper end of the market for advice
Broader Market Environment
Key points
Uncertain economic conditions cloud expectations
Collectives and stock market performance
- Figure 6: FTSE 100 and FTSE All Share -- daily index movements, June 2003-June 2009
All-time-low base rate should help boost risk appetite
- Figure 7: Monthly changes in the rate of annual inflation* and Bank of England base rate -- UK, June 2002-June 2009
Inflation considerations
More focus should be put on the real rate of return
Demographic trends favour growth in demand
- Figure 8: Socio-demographic composition of United Kingdom population, 1994-2014
Competitive Context
Key points
Collective investment alternatives
- Figure 9: Penetration of savings and investment products, April 2009
Cash ISA subscriptions increase while equity ISA subscriptions fall
- Figure 10: Number of ISA accounts and amounts subscribed, segmented by type, 1999-2000-2008/09
NS&I has benefited from a flight to safety
- Figure 11: Amounts invested in NS&I annually and total funds held, 2003/04-2008/09
Personal pensions compete for individuals' funds
- Figure 12: New APE* individual pension premiums, by product type, 2003-08
Direct equity holdings on the decline
Investment bonds
- Figure 13: Total number of new single-premium investment bond contacts and value of new premiums, 2002-08
Buy-to-let loses its appeal as house prices decline
Strengths and Weaknesses in the Market
- Figure 14: Collective Investments -- SWOT analysis, 2009
Market Size and Forecast
Key points
Gross retail sales back up in 2009
- Figure 15: Gross retail sales of UK-domiciled unit trusts/OEICs, 1999-2009
Net retail sales recovery
- Figure 16: Net retail sales of UK-domiciled unit trusts/OEICs, 1999-2009
The ISA season boost in retail sales
- Figure 17: Gross and net ISA sales of unit trusts and OEICs, April 2007-June 2009
Collectives the main investment held in stocks and share ISAs
- Figure 18: Market value of ISA funds, stocks and shares component, as of 5 April 2008, by type of qualifying investment, 2004-08
Asset allocation -- equities playing a lesser role
- Figure 19: UK-domiciled funds under management, by asset class, 2004-08
Forecast
Gross retail sales set for further growth
- Figure 20: Forecast of gross retail sales of UK domiciled unit trusts/OEICs, 2004-14
Passively managed funds pose a competitive threat
Factors incorporated
Market Share
Key points
Retail and private client funds under management
- Figure 21: Retail and private client funds under management (minimum lump sum is less than or equal to £50,000), by fund manager, June 2008 and 2009
Retail funds under management
- Figure 22: Retail funds under management (minimum lump sum is less than or equal to £10,000), by fund manager, June 2008 and 2009
Market share in the ISA market holds steady with Fidelity at the top
- Figure 23: UK ISA funds under management, June 2008 and 2009
Companies and Products
Major players
FIL Investment Management Limited
Invesco Perpetual
Jupiter Unit Trust Managers Limited
M&G Securities Limited
Threadneedle Investment Services Ltd
Key fund supermarkets
Brand Communication and Promotion
Key points
Advertising spend down nearly a third in the year to April 2009
- Figure 24: Collective investment advertising expenditure, by sub-category, 2005-09
F&C and Invesco responsible for a third of total adspend
- Figure 25: Advertising expenditure, by the top ten collective investment advertisers, 2008 and 2009
Most advertising goes through the press and direct mail
- Figure 26: Collective investment advertising expenditure, by media type, 12 months to April 2009
Channels to Market
Key points
Intermediaries primary distribution channel
- Figure 27: Proportion of unit trust/OEIC gross retail sales, by distribution channel, 2005-09 (Q2)
Fund supermarkets play a major role in fund selection
Over 40% of sales within ISAs via fund supermarkets
- Figure 28: Proportion of unit trust/OEIC ISA sales, by distribution channel, 2005-09 (Q2)
The Consumer -- Investment Ownership
Key points
A strong preference for low risk savings and investments
- Figure 29: Investment ownership, April 2009
Investment ownership jumps significantly after 35
- Figure 30: Savings and investment products owned, by age, April 2009
Positive link between affluence and investment ownership
- Figure 31: Savings and investment products owned, by gender and socio-economic group, April 2009
Personal wealth the main factor in investment ownership
- Figure 32: Savings and investment products owned, by level of investible assets, April 2009
The Consumer -- What Consumers Are Looking For in a Long-term Investment
Key points
Capital preservation and proven success top priorities
- Figure 33: Important factors when choosing a long-term investment, April 2009
Engagement with long-term savings and investing increases with age
- Figure 34: Important factors when choosing a long-term investment, by gender and age, April 2009
Affluent demand more...
- Figure 35: Important factors when choosing a long-term investment, by socio-economic group, April 2009
... and are most likely to consider tax benefits
- Figure 36: Important factors when choosing a long-term investment, by gross annual household income, April 2009
The Consumer -- Sources of Advice
Key points
Banks, building societies and IFAs top sources of investment advice
- Figure 41: Source of financial advice, April 2009
Word of mouth an under-rated way to generating new business
Owners of riskier investments turn to IFAs for advice
- Figure 42: Product ownership, by source of financial advice, April 2009
Advice and risk tolerance
- Figure 43: Source of financial advice, by attitudes towards risk, April 2009
Professional advice becomes increasingly prevalent as one ages
- Figure 44: Source of financial advice, by gender and age, April 2009
The growing influence of the internet
Wealthy consult professionals as well as friends and family
- Figure 45: Source of financial advice, by socio-economic group and gross annual household income, April 2009
Appendix -- Market Background and Definitions
Investment risk
- Figure 51: Risk profile of selected savings and investments
Collective investment types
Fund supermarkets
Appendix -- The Consumer -- Investment Ownership
- Figure 52: Most popular ownership of select savings and investment products, by demographics, April 2009
- Figure 53: Next most popular ownership of select savings and investment products, by demographics, April 2009 (continued)
Appendix -- The Consumer -- What Consumers Are Looking For in a Long-term Investment
- Figure 54: Product ownership, by important factors when choosing a long-term investment, April 2009
- Figure 55: Most popular important factors when choosing a long-term investment, by demographics, April 2009
- Figure 56: Next most popular important factors when choosing a long-term investment, by demographics, April 2009 (continued)
Appendix -- The Consumer -- Sources of Advice
- Figure 58: Preferred sources of investment advice, by demographics, April 2009

Collective Investments - UK - August 2009