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Collective Investments - UK - July 2011

Against this backdrop, Mintel’s report explores how the current market conditions are influencing investment activity and investor confidence in the retail sector. To provide context, the report offers an overview of the size and composition of the UK collective investment market and examines the main issues and industry developments currently keeping fund managers and investment companies occupied. These range from macroeconomic trends to regulatory developments, such as the Retail Distribution Review and various new EU directives. The overview analysis is complemented by the results of Mintel’s independent consumer survey, which provides additional insight into patterns of product ownership, investor behaviour and investment intentions over the coming year.

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Table of contents

  1. Introduction

      • Product definitions
        • Abbreviations
        • Executive Summary

            • The market
              • Gross retail sales of open-ended funds expected to continue their steady climb
                • Figure 1: Forecast of gross retail unit trust and OEIC sales – fan chart, 2006-16
              • Gross sales increased in 2010, but net sales were down on 2009
                • Outlook for 2011
                  • Investment trust sales and recent performance
                    • The open-ended sector is larger than the closed-ended by assets under management
                      • Figure 2: Retail investment product sales, year to 31 March 2010
                    • Market factors
                      • Uncertain economic and investment backdrop
                        • Regulatory changes create new opportunities
                          • Companies, brands and innovation
                            • Fund launch activity
                              • Leading fund managers
                                • Largest investment companies
                                  • Advertising activity
                                    • Distribution trends
                                      • Figure 3: Gross retail sales of unit trusts and OEICs, by distribution channel, 2006-10
                                    • RDR
                                      • The consumer
                                        • Six million people have an equity ISA or hold collective investments outside the ISA wrapper
                                          • Figure 4: Ownership of savings and investment products, May 2011
                                        • Savings and investment activity over the past year
                                          • Figure 5: Level of saving/investment activity over the past year, May 2011
                                        • Investor behaviour and motivation
                                          • Investment intentions over the coming year
                                            • Figure 6: Savings and investment products planning to invest in within the next 12 months, May 2011
                                          • What we think
                                          • Issues in the Market

                                              • Why is the closed-ended sector so much smaller than the open-ended sector?
                                                • How will the new EU directive on alternative investment fund managers affect the investment company industry?
                                                  • What other opportunities lie in wait for investment companies?
                                                    • Similarly, what opportunities are on the horizon for open-ended fund managers?
                                                      • In which asset classes will consumers invest their money over the coming year?
                                                      • Future Opportunities

                                                          • Trend: Seeking security in these uncertain times
                                                            • Trend: Increasing longevity is challenging the traditional view of age-related asset allocation
                                                            • Internal Market Environment

                                                              • Key points
                                                                • Banking reform and a new regulatory framework
                                                                  • New opportunities for investment trust companies
                                                                    • UCITS and other European legislation
                                                                      • The RDR – positive outcomes and potential pitfalls
                                                                        • Implications for investment companies
                                                                          • Implications for fund managers
                                                                            • Other recent developments
                                                                            • Broader Market Environment

                                                                              • Key points
                                                                                • Government looks to the private sector to stimulate economic growth
                                                                                  • Greek debt crisis could jeopardise the economic recovery in the UK
                                                                                    • Level of household savings declines due to slower earnings growth
                                                                                      • Greek debt crisis again unsettles the markets
                                                                                        • Figure 7: FTSE 100 and FTSE All-Share – daily index movements, June 2002-June 2011
                                                                                      • Low base rate and high inflation makes cash an unattractive asset class
                                                                                        • Figure 8: Average annual changes in the Bank of England base rate, CPI and RPI – UK, 2003-12
                                                                                      • Investor sentiment weakens
                                                                                        • Figure 9: Intended equity buying and selling indices, Q3/Q4 2002- Q1/Q2 2011
                                                                                    • Competitive Context

                                                                                      • Key points
                                                                                        • Rival investment products
                                                                                          • Figure 10: Retail investment product sales, year to 31 March 2010
                                                                                          • Figure 11: Market value of funds held in stocks and shares ISAs, 2010 (provisional)
                                                                                        • Open-ended collectives versus investment bonds
                                                                                          • Figure 12: Comparison of unit trusts/OEICs and investment bonds, 2011
                                                                                        • Unit trusts and OEICs outsell investment bonds
                                                                                          • Figure 13: New investment bond premiums versus gross retail unit trust/OEIC sales, 2006-10
                                                                                        • ETFs are growing in popularity, albeit from a small base
                                                                                        • Market SWOT Analysis

                                                                                            • Figure 14: UK collective investment market – SWOT analysis, 2011
                                                                                        • Who’s Innovating?

                                                                                          • Key points
                                                                                            • IMA sector review
                                                                                              • New product launches in the open-ended fund sector
                                                                                                • Recent activity in the closed-ended sector
                                                                                                • Trade Perspective

                                                                                                    • About the AIC
                                                                                                      • These more uncertain times
                                                                                                        • New regulation furnishes new opportunity
                                                                                                          • AIC plans to implement a new adviser education programme
                                                                                                            • Bright outlook for investment companies
                                                                                                            • Market Size and Forecast

                                                                                                              • Key points
                                                                                                                • Open-ended funds
                                                                                                                  • Retail unit trust and OEIC sales grow further in 2010
                                                                                                                    • Figure 15: Retail sales of unit trusts and OEICs – UK-domiciled, 2006-10
                                                                                                                  • Outlook for 2011
                                                                                                                    • Five-year forecast
                                                                                                                      • Figure 16: Gross retail sales of unit trusts and OEICs – UK-domiciled – fan chart, 2006-16
                                                                                                                      • Figure 17: Forecast of gross retail sales of unit trusts and OEICs – UK-domiciled, at current and constant prices, 2006-16
                                                                                                                    • Forecast methodology
                                                                                                                      • Fan chart explanation
                                                                                                                        • Closed-ended investment companies
                                                                                                                          • Retail investment trust sales start to recover
                                                                                                                            • Figure 18: Volume of regulated retail sales of investment trusts, unit trust/OEICs and stocks and shares ISAs, 2006-10
                                                                                                                          • Outlook bright for investment companies
                                                                                                                            • Just over a quarter of closed-ended investment company assets are held offshore
                                                                                                                              • Figure 19: Number of closed-ended investment companies and value of assets, May 2001, May 2010 and May 2011
                                                                                                                          • Segment Performance

                                                                                                                            • Key points
                                                                                                                              • Open-ended sector – bonds lose their shine
                                                                                                                                • Figure 20: Net retail unit trust/OEIC fund sales (UK-domiciled), by asset class, 2006-10
                                                                                                                              • Open-ended sector – strong growth in the balanced asset class in 2010
                                                                                                                                • Figure 21: Unit trust/OEIC funds under management (UK-domiciled only), by asset class, 2006-10 (year-end)
                                                                                                                            • Market Share

                                                                                                                              • Key points
                                                                                                                                • Invesco Perpetual is the largest open-ended fund manager...
                                                                                                                                  • Figure 22: Top 20 fund managers, by retail and private client funds under management (minimum lump sum is £50,000 or less), 2009-11
                                                                                                                                • ...but HBOS takes the lead in the ISA fund market
                                                                                                                                  • Figure 23: Top ten ISA fund managers, by ISA and PEP funds under managements, 2009-11
                                                                                                                                • JPMorgan is the largest investment trust provider in the UK
                                                                                                                                  • Figure 24: Top 20 investment management groups, ranked by assets under management, March 2011
                                                                                                                              • Companies and Products

                                                                                                                                  • Top three unit trust/OEIC fund managers
                                                                                                                                    • Invesco Perpetual
                                                                                                                                      • M&G
                                                                                                                                        • Fidelity
                                                                                                                                          • Top three investment trust managers
                                                                                                                                            • JPMorgan Asset Management
                                                                                                                                              • F&C Investments
                                                                                                                                              • Brand Communication and Promotion

                                                                                                                                                • Key points
                                                                                                                                                  • Adspend on investment products is still way down on pre-crisis levels
                                                                                                                                                    • Figure 25: Total advertising expenditure on investment products and intermediary services, by product category, 2007-11
                                                                                                                                                  • Fidelity is the top advertiser for the second year in a row
                                                                                                                                                    • Figure 26: Top ten advertisers of collective investments and stocks and shares ISAs, 2009-11
                                                                                                                                                  • Providers mostly rely on the press and direct mail to promote their brands and products
                                                                                                                                                    • Figure 27: Adspend on collective investments and stocks and shares ISAs, by media type, 2009-11
                                                                                                                                                • Channels to Market

                                                                                                                                                  • Key points
                                                                                                                                                    • Intermediaries continue to grow their share of open-ended fund sales
                                                                                                                                                      • Figure 28: Gross retail sales of unit trusts and OEICs, by distribution channel, 2006-10
                                                                                                                                                    • More than a third of fund sales were transacted via open-architecture platforms in 2010
                                                                                                                                                      • Figure 29: Share of gross retail unit trust and OEIC sales, by distribution channel, 2010
                                                                                                                                                    • Platform development
                                                                                                                                                      • RDR implications for platforms
                                                                                                                                                        • RDR reforms will raise the profile of investment trusts
                                                                                                                                                        • Ownership of Savings and Investments

                                                                                                                                                          • Key points
                                                                                                                                                            • Survey background
                                                                                                                                                              • Latest survey records a fall in the proportion of UK adults with savings
                                                                                                                                                                • Figure 30: Ownership of common savings and investment products, 2009-11
                                                                                                                                                              • Some six million UK adults hold collective investments either in or outside an ISA
                                                                                                                                                                • AB males are a major target group
                                                                                                                                                                  • Figure 31: Ownership of savings and investments, by gender and socio-economic group, May 2011
                                                                                                                                                                • Ownership of collective investments is highest among the over-45s…
                                                                                                                                                                  • Figure 32: Ownership of savings and investments, by age, May 2011
                                                                                                                                                                • Insight and implication
                                                                                                                                                                  • …and increases with household income
                                                                                                                                                                    • Figure 33: Ownership of savings and investments, by gross annual household income, May 2011
                                                                                                                                                                  • Insight and implication
                                                                                                                                                                  • Recent Investment Activity

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Two fifths of people saved less than they expected to over the past year
                                                                                                                                                                        • Figure 34: Level of saving/investment activity over the past year, May 2011
                                                                                                                                                                      • Insight and implication
                                                                                                                                                                        • A similar pattern emerges among the holders of collective investments…
                                                                                                                                                                          • Figure 35: Level of saving/investment activity over the past year, by ownership of savings and investments, May 2011
                                                                                                                                                                        • …while there is some variance among the different age groups
                                                                                                                                                                          • Figure 36: Level of saving/investment activity over the past year, by age, May 2011
                                                                                                                                                                        • Note
                                                                                                                                                                        • Investor Behaviour

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Half of all savers/investors drew on their savings during the past year
                                                                                                                                                                                • Figure 37: Experiences and attitudes towards savings and investing, May 2011
                                                                                                                                                                              • Those who saved less than they expected over the past year are also very likely to have drawn on their savings
                                                                                                                                                                                • Figure 38: Experiences and attitudes towards saving and investing, by level of investment activity over the past year, May 2011
                                                                                                                                                                              • Those aged 35-64 are most likely to be saving for the longer term
                                                                                                                                                                                • Figure 39: Experiences and attitudes towards savings and investing, by age, May 2011
                                                                                                                                                                              • AB men are keenest on making their own investment decisions
                                                                                                                                                                                • Figure 40: Experiences and attitudes towards savings and investing, by gender and socio-economic group, May 2011
                                                                                                                                                                            • Investment Plans for the Coming Year

                                                                                                                                                                              • Key points
                                                                                                                                                                                • Around one in 12 UK adults plan to invest in equity ISAs or collective investments during the next year
                                                                                                                                                                                  • Figure 41: Products planning to invest in during the next 12 months, May 2011
                                                                                                                                                                                • Growing interest in ETFs, reduced appetite for investment bonds
                                                                                                                                                                                  • Figure 42: Products planning to invest in during the next 12 months, May 2011
                                                                                                                                                                                • Clients of IFAs and stockbrokers will be the most active investors over the coming year
                                                                                                                                                                                  • Figure 43: Products planning to invest in during the next 12 months, by usage of advisers, May 2011
                                                                                                                                                                                • ABC1s aged 35-54 is the primary target group
                                                                                                                                                                                • Appendix – Market Forecast

                                                                                                                                                                                    • Figure 44: Best and worst forecast of gross retail sales of unit trusts and OEICs – UK-domiciled, 2011-16
                                                                                                                                                                                • Appendix – Ownership of Savings and Investments

                                                                                                                                                                                    • Figure 45: Ownership of savings and investments, by demographics, May 2011
                                                                                                                                                                                • Appendix – Collectives/Equity ISA Investor Profile

                                                                                                                                                                                    • Figure 46: Investor profile of those who own collectives and/or stocks and shares ISAs, by demographics, May 2011
                                                                                                                                                                                • Appendix – Recent Investment Activity

                                                                                                                                                                                    • Figure 47: Level of investment activity over the past year, by demographics, May 2011
                                                                                                                                                                                • Appendix – Investment Plans

                                                                                                                                                                                    • Figure 48: Products intend to invest in within the next 12 months, by demographics, May 2011
                                                                                                                                                                                • Appendix – Comparison of Open- Versus Closed-ended Funds

                                                                                                                                                                                    • Figure 49: Key characteristics of the three main types of collective investment

                                                                                                                                                                                Companies Covered

                                                                                                                                                                                • Aberdeen Asset Management PLC
                                                                                                                                                                                • Allianz Group
                                                                                                                                                                                • Artemis Investment Management
                                                                                                                                                                                • Asda Group Ltd
                                                                                                                                                                                • Association of British Insurers
                                                                                                                                                                                • Association of Investment Trust Companies
                                                                                                                                                                                • Aviva Plc
                                                                                                                                                                                • AXA UK plc
                                                                                                                                                                                • Baillie Gifford & Co
                                                                                                                                                                                • Bank of England
                                                                                                                                                                                • Bank of New York Mellon Corporation, The
                                                                                                                                                                                • Barclays Bank plc
                                                                                                                                                                                • Birmingham City Football Club
                                                                                                                                                                                • BlackRock, Inc.
                                                                                                                                                                                • BP p.l.c.
                                                                                                                                                                                • CACI Limited
                                                                                                                                                                                • Church House Investments
                                                                                                                                                                                • Co-operative Group
                                                                                                                                                                                • Cofunds
                                                                                                                                                                                • Duet Real Estate Finance Ltd
                                                                                                                                                                                • Electra Partners Europe
                                                                                                                                                                                • Euronext Liffe (Holdings) plc
                                                                                                                                                                                • F&C Asset Management plc
                                                                                                                                                                                • F&C Management Limited
                                                                                                                                                                                • Facebook, Inc.
                                                                                                                                                                                • Fidelity Investment Services Limited
                                                                                                                                                                                • Financial Services Authority (The)
                                                                                                                                                                                • Financial Times Group
                                                                                                                                                                                • First State Investments
                                                                                                                                                                                • Franklin Resources, Inc.
                                                                                                                                                                                • Friends Provident plc
                                                                                                                                                                                • Fundsdirect
                                                                                                                                                                                • Gfk NOP
                                                                                                                                                                                • Grupo Santander Central Hispano S.A.
                                                                                                                                                                                • Hargreaves Lansdown Plc
                                                                                                                                                                                • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                                • Henderson Global Investors
                                                                                                                                                                                • HSBC Private Bank (UK) Limited
                                                                                                                                                                                • International Monetary Fund
                                                                                                                                                                                • Invesco Perpetual
                                                                                                                                                                                • Investec
                                                                                                                                                                                • Investment Management Association
                                                                                                                                                                                • Ipsos MORI
                                                                                                                                                                                • J. Sainsbury
                                                                                                                                                                                • James Hay Pension Trustees Limited
                                                                                                                                                                                • John Gilbert Financial Research
                                                                                                                                                                                • JPMorgan Chase & Co
                                                                                                                                                                                • JPMorgan Invest LLC (BrownCo)
                                                                                                                                                                                • Jupiter Asset Management Limited
                                                                                                                                                                                • Legal & General Investment Management
                                                                                                                                                                                • Lloyds Banking Group
                                                                                                                                                                                • London Stock Exchange plc
                                                                                                                                                                                • M&G Group
                                                                                                                                                                                • Marks & Spencer
                                                                                                                                                                                • Morgan Stanley & Co International Ltd
                                                                                                                                                                                • National Savings & Investments
                                                                                                                                                                                • NS&I
                                                                                                                                                                                • Prudential plc
                                                                                                                                                                                • RIT Capital Partners
                                                                                                                                                                                • Royal Academy of Arts
                                                                                                                                                                                • Schroders plc
                                                                                                                                                                                • Scottish Friendly Assurance Society Ltd
                                                                                                                                                                                • Scottish Widows Investment Partnership Ltd
                                                                                                                                                                                • Skandia UK
                                                                                                                                                                                • St James' Place Plc
                                                                                                                                                                                • Standard Life Bank Limited
                                                                                                                                                                                • SVG Capital
                                                                                                                                                                                • Tesco Plc
                                                                                                                                                                                • Threadneedle Investment Services Ltd
                                                                                                                                                                                • Waitrose
                                                                                                                                                                                • Witan Investments
                                                                                                                                                                                • Wm Morrison Supermarkets

                                                                                                                                                                                Collective Investments - UK - July 2011

                                                                                                                                                                                £1,995.00 (Excl.Tax)