Asset manager profitability soars

The profitability of the investment management industry has grown strongly over the last quarter, amid an increase in average costs, a unanimous rise in business volumes and a robust increase in fee, commission and premium income.

According to a study by Pricewaterhouse Coopers and the Confederation of British Industry, this is the sixth time that profitability of the investment management industry has grown.

Within the wider financial services sector, activity has grown too, although only for the second quarter running.

The value of fee, commission and premium income held steady in the past three months in the financial services industry as a whole, contrary to the forecast of a rise. The value of income from net interest, investment and trading fell, and a further fall is likely.

Pars Purewal, a team leader for British asset management at PwC, says investment managers have enjoyed another good quarter as volumes of business, profitability and numbers employed have all increased. (article continues below)

The sector is now looking to invest in distribution and develop new products and services. Regulation, Purewal adds, will be a major driver of costs this year as investment managers seek to comply with a range of new regulation.

Within the broader financial services sector, profitability did not increase as fast as expected. In fact, it has grown at the slowest pace for 18 months and numbers employed in the sector fell at the fastest pace for 17 years.

Asked how their business volumes fared in the three months to December, 50% of all respondents said that volumes increased and 23% said they fell. Business volumes grew for all sub-sectors of financial services in the past quarter, apart from banking, where volumes were flat.