Optimism in investment management industry hits record lows

Optimism in the investment management industry shrank to its lowest level in 2011 during the fourth quarter, according to the latest survey by PricewaterhouseCoopers and the CBI, the employers’ organisation.

More respondents in the investment management sector were less optimistic about their overall business situation.

The quarterly survey also revealed that business volumes had declined for the first time since March 2009, and further decline was expected in the next quarter.

Declining revenues also led to lower fee, commission and premium income, the first fall since June 2009.

This in turn resulted in a fall in profitability, the fourth quarter performing “well below expectations for the third successive survey”.

PwC UK investment management leader Pars Purewal says: “The turmoil in the eurozone and subsequent volatility in markets in the last part of 2011 has led to lower levels of business and fee income amongst investment management firms and this has been compounded by investors, particularly private clients switching their capital to low-fee assets.

“There is significant concern that weak demand will be a threat to firms over the coming year and firms will also need to spend an exceptional amount of time and resources on making sure they keep abreast of and compliant with new regulation.”

Investment managers also highlighted ­concerns that increased competition would come from the wider financial services sector.

The survey, which also looks at other financial services sectors, found that more than half of respondents thought there would be further deterioration in the market over the next six months, with normal conditions not returning until at least the second half of 2012.

Ian McCafferty, the chief economic adviser to the CBI, says that although the fourth quarter was a strong one for the general financial services sector, there were some negative indicators.

McCafferty highlights a more general lack of optimism, lower employment figures and weaker investment plans amid concerns over the global economy and eurozone troubles.