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Industry needs focused regulation, says IMA survey

The UK asset management industry needs more focused regulation, not more regulation, according to the latest annual survey from the Investment Management Association.

The survey of senior industry figures reveals concern that regulation was ineffective during the credit crisis and more focused controls are now needed.

Respondents blamed the credit crisis on cheap money facilitating a wave of imprudent lending which was exacerbated by institutions packaging up and selling on their debts.

Inadequate risk controls in investment banks, the failure of credit rating agencies to adequately assess the risk level of financial products, and insufficient scrutiny along the value chain were also said to have given added impetus to the financial crisis.

On the issue of the UK tax system, senior figures say that the level of volatility and uncertainty, coupled with a lack of explanation have made people wary about the UK as a domicile to operate from. Despite this, IMA figures show that total assets under management for overseas clients are up from 27 per cent in 2006 to 30 per cent for 2007.

Findings from the survey reveal total assets managed in the UK by IMA member firms have increased from £3.1tn for the year ended December 2006 to £3.4tn in December 2007.

Of the £3.4tn under management, 52 per cent is invested in equities, half of which in UK stocks. Thirty two per cent is invested in fixed income, 9 per cent in cash or money market instruments and 4 per cent in property.

Matched samples suggest a continued shift out of equities as people move towards less risky products.

Retail assets managed in the UK increased to £770bn for 2007 from £650bn in 2006 with equities accounting for nearly 75 per cent.

Net retail sales for the year fell substantially to £9.5bn in 2007 from £15.3bn in 2006 with heavy falls in the fourth quarter after the credit crisis took hold.

IMA chief executive Richard Saunders says: “Economic conditions in the latter half of 2007 led to greater caution among investors and net retail sales slowed significantly. Unsurprisingly, equity funds were the worst hit as investors shifted their assets, moving towards less risky and more conservative products. This caution is likely to persist in the immediate future, given current market conditions.”


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