IMA: No return to the equity culture of the 1990s

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The continued decline in fund focused on equities confirms a shift towards more outcome-focused products, according to the 11th IMA Annual Survey.

The new data shows that while equity funds still represent over half of investment funds under management, there is a marked long-term decline in their dominance.

In 1993, 89 per cent of total funds under management were in equity funds and this has dived to 52 per cent in 2012.

This finding has been attributed to an increased diversification amongst investors and ‘hunt for yield’, with a rise in capital protection over recent years.

Within this, UK equity holdings have continued to decline with investors favouring international exposure. The UK now accounts for just 33 per cent of total equities managed in the UK.

In contrast, fixed income holdings fell by one per cent since the last survey to 37 per cent.

IMA director of public policy Jonathan Lipkin says: “Firms are telling us something increasingly consistent, which is that they expect no return to the equity culture that characterised the 1990s. The market experience of the past decade, dominated by the dot.com crash and the more recent global financial crisis, is likely to have permanent consequences.

“A range of demographic, regulatory and accounting changes are also driving client needs and expectations. For the asset management industry, this will mean different things for different firms. Some will continue to specialise, providing investment components into the market. Others will move in the direction of connecting more directly with client needs, for example through target-date funds or LDI products in the pensions market.”

The survey also highlights a greater identification amongst asset managers of the importance of client trust, with respondents making greater efforts to communicate with both institutional and retail investors in simpler and more transparent ways.

IMA chief executive Daniel Godfrey says: “Building trust is fundamental for the industry if we are to fulfil our role of helping people build resilience to financial adversity and achieve their financial aspirations.

“It is encouraging to learn that members are investing significant time and resource into their communications and processes to ensure they give the end investor the information they need in a format they can understand.”