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Collective Investments - UK - July 2013

“A large number of UK retail investors are simply unprepared to put their money at risk by investing in equities. Given that a larger number of people save for emergencies and unexpected events, rather than to generate an income, most adults will always be wary of using products outside the traditional savings accounts and cash ISAs.”

– Stevan Obradovic, Financial Services Analyst

Some questions answered in this report include:

  • Why are investors shunning equity-based products?
  • How many adults are considering investing in collective funds in the next 12 months?
  • What are consumers’ main saving and investing goals?
  • Do investors look for passive or active fund management?

Despite economic uncertainty and market volatility, the collective investment fund market has performed relatively well. Indeed, gross sales of unit trusts and OEICs actually increased marginally during 2012. However, global economic woes continue to test even the most seasoned investors, and as a result the prevailing attitude among UK consumers is one of caution.

Long-term prospects for the industry are positive, however, much of this will depend on economic improvements and a resolution to the eurozone debt crisis. One area where collective investment fund providers can actually exert an influence is to change consumer attitudes towards equity-based investing. At present, the majority of UK consumers are still not prepared to take risks with their savings and tend to overlook products such as collective investment funds. The onus is on the industry to educate consumers how easy it can be to purchase these products, and how over the long term, these investments will almost certainly outperform risk-free savings accounts and cash ISAs.

This report examines the market for collective investment funds, with analysis focused on some of the key developments in this sector including the impact of economic and regulatory challenges. This report also provides a market size breakdown, while considering the future prospects of gross retail sales of unit trusts and OEICs. The report concludes with Mintel’s exclusively commissioned research looking at product ownership, influential factors when choosing collectives and general attitudes towards saving and investing.

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Gross retail sales of open-ended funds expected to grow in 2013 and onwards
              • Figure 1: Forecast for gross retail sales of unit trusts and OEICs (UK domiciled), 2008-18
            • Closed-ended sector is significantly smaller
              • The majority of funds are sold via intermediated channels
                • Figure 2: Gross retail sales of unit trusts and OEICs, by distribution channel, 2008-12
              • Competing retail investment products
                • Figure 3: Retail investment product sales, by volume, year to 31 March 2012
              • Market factors
                • Economic uncertainty continues to test investor fortitude
                  • Key regulatory changes
                    • Companies, brands and innovations
                      • Market share is concentrated at the top
                        • Adspend on investment products and intermediary services was down in 2012/13
                          • Who’s innovating?
                            • The consumer
                              • Value of savings and investments
                                • Figure 4: Value of savings and investments, May 2013
                              • Investment portfolio
                                • Figure 5: Savings and investment portfolio, May 2013
                              • Saving and investing goals
                                • Figure 6: Saving and investment goals, May 2013
                              • Influential factors when choosing an investment fund
                                • Figure 7: Important factors when choosing an investment fund, May 2013
                              • Average length of time consumers hold investments
                                • Figure 8: Average length of time investments held, May 2013
                              • Consumer attitudes towards saving and investing
                                • Figure 9: Attitudes towards investing and investments, May 2013
                              • What we think
                              • Issues in the Market

                                  • Why are investors shunning equity-based products?
                                    • How many adults are considering investing in collective funds in the next 12 months?
                                      • What are consumers’ main saving and investing goals?
                                        • Do investors look for passive or active fund management?
                                        • Trend Application

                                          • Watch your investment grow from the sidelines
                                            • Becoming a self-taught investor
                                              • Mintel futures: Generation Next
                                              • Market Drivers

                                                • Key points
                                                  • Planned buying and selling of shares/unit trusts contracted in Q2/3 2013
                                                    • Figure 10: Intended investment activity, Q3/Q4 2002-Q2/Q3 2013
                                                  • FTSE 100 trading at its highest point since the financial crisis
                                                    • Figure 11: FTSE 100 and FTSE All-Share – daily index movements, January 2006-May 2013
                                                  • RDR should have a positive impact on investment trusts
                                                    • FCA bans cash rebates on platforms
                                                      • MIFID II and the potential conflict with the RDR
                                                        • PRIPs update
                                                          • BoE base rate remains at historical low
                                                            • Figure 12: Average annual changes in the Bank of England base rate, CPI and RPI – UK, March 2008- March 2013
                                                          • Households continue to face income squeeze
                                                            • Figure 13: Monthly change in RPI and average weekly earnings, March 2008-March 2013
                                                        • Competitor Products

                                                          • Key points
                                                            • There is some overlap among competing retail investment products
                                                              • Figure 14: Retail investment product sales, by volume, year to 31 March 2012
                                                              • Figure 15: Market value of funds held in stocks and shares ISAs, 2012
                                                            • Unit trusts and OEICs significantly outsell investment bonds
                                                              • Figure 16: New investment bond premiums versus gross retail unit trust/OEIC sales, 2009-12
                                                            • ETFs should continue to gain momentum among UK investors
                                                            • SWOT Analysis

                                                                • Figure 17: UK collective investment market – SWOT analysis, 2013
                                                            • Who’s Innovating?

                                                              • Key points
                                                                • Fundsmith launches regular withdrawal facility
                                                                  • THS Partners opens up access to its top-performing fund to retail investors
                                                                    • Candid Money launches fund supermarket comparison site
                                                                      • Exec-only platform to cater for low-value clients post-RDR
                                                                        • Fidelity launches a four-tier investment service
                                                                        • Market Size and Forecast

                                                                          • Key points
                                                                            • Open-ended funds
                                                                              • Net sales of OEICs continue to fall, declining by a quarter in 2012
                                                                                • Figure 18: Value of retail sales of unit trusts and OEICs – UK-domiciled, 2008-12
                                                                              • Market prospects as of June 2013
                                                                                • Five-year forecast
                                                                                  • Figure 19: Forecast for gross retail sales of unit trusts and OEICs (UK domiciled), 2008-18
                                                                                  • Figure 20: Forecast of gross retail sales of unit trusts and OEICs (UK domiciled), at current and constant prices, 2008-18
                                                                                • Forecast methodology
                                                                                  • Fan chart explanation
                                                                                    • Closed-ended funds
                                                                                      • Retail investment trust sales declined by 40% in 2012
                                                                                        • Figure 21: Volume of regulated retail sales of investment trusts, unit trust/OEICs and stocks and shares ISAs, 2008-12
                                                                                      • RDR brightens the outlook for investment companies
                                                                                        • A quarter of closed-ended companies operate offshore
                                                                                          • Figure 22: Number of closed-ended investment companies and value of assets, March 2011-March 2013
                                                                                      • Segment Performance

                                                                                        • Key points
                                                                                          • Open-ended sector – net sales decline by a quarter in 2012
                                                                                            • Figure 23: Net retail unit trust/OEIC fund sales (UK-domiciled), by asset class, 2008-12
                                                                                          • Equity-based funds account for a large proportion of open-ended funds
                                                                                            • Figure 24: Unit trust/OEIC funds under management (UK-domiciled only), by asset class, 2008-12 (year-end)
                                                                                        • Market Share

                                                                                          • Key points
                                                                                            • Invesco Perpetual and M&G Securities maintain their lead
                                                                                              • Figure 25: Top 20 fund managers, by retail and private client funds under management (minimum lump sum is £50,000 or less), March 2011-March 2013
                                                                                            • Top ten account for 75% of ISA fund market
                                                                                              • Figure 26: Top ten ISA fund managers, by ISA and PEP funds under management, 2011-13
                                                                                            • St James’s Place grows share of ISA fund market
                                                                                              • JPMorgan is the largest investment trust provider
                                                                                                • Figure 27: Top 20 investment management groups, ranked by assets under management, March 2013
                                                                                            • Companies and Products

                                                                                              • Top three unit trust/OEIC fund managers
                                                                                                • Invesco Perpetual
                                                                                                  • Unit trust/OEIC retail funds under management as at 31 March 2013
                                                                                                    • Company description
                                                                                                      • Product range
                                                                                                        • Recent activity
                                                                                                          • M&G Securities
                                                                                                            • Unit trust/OEIC retail funds under management as at 31 March 2013
                                                                                                              • Company description
                                                                                                                • Product range
                                                                                                                  • Recent activity
                                                                                                                    • Recent promotional activity
                                                                                                                      • BNY Mellon
                                                                                                                        • Unit trust/OEIC retail funds under management as at 31 March 2013
                                                                                                                          • Company description
                                                                                                                            • Product range
                                                                                                                              • Recent activity
                                                                                                                                • Recent promotional activity
                                                                                                                                  • Top three investment trust managers
                                                                                                                                    • JPMorgan Asset Management
                                                                                                                                      • Investment trust assets under management as at 31 March 2013
                                                                                                                                        • Company description
                                                                                                                                          • Product range
                                                                                                                                            • Recent activity
                                                                                                                                              • F&C Investments
                                                                                                                                                • Investment trust assets under management as at 31 March 2013
                                                                                                                                                  • Company description
                                                                                                                                                    • Product range
                                                                                                                                                      • Recent activity
                                                                                                                                                        • Recent promotional activity
                                                                                                                                                          • Aberdeen Asset Management
                                                                                                                                                            • Investment trust assets under management as at 31 March 2013
                                                                                                                                                              • Company description
                                                                                                                                                                • Product range
                                                                                                                                                                  • Recent activity
                                                                                                                                                                    • Recent promotional activity
                                                                                                                                                                    • Brand Communication and Promotion

                                                                                                                                                                      • Key points
                                                                                                                                                                        • Adspend shrank in the year to March 2013 by almost a third
                                                                                                                                                                          • Figure 28: Total advertising expenditure on investment products and intermediary services, by product category, 2010/11-2012/13
                                                                                                                                                                        • Fidelity accounts for the largest proportion of industry adspend
                                                                                                                                                                          • Figure 29: Top ten advertisers of collective investments and stocks and shares ISAs, 2010/11-2012/13
                                                                                                                                                                        • Press advertising accounts for two thirds of adspend
                                                                                                                                                                          • Figure 30: Adspend on collective investments and stocks and shares ISAs, by media type, 2010/11-2012/13
                                                                                                                                                                        • A note about adspend
                                                                                                                                                                        • Channels to Market

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Intermediated business accounts for 91% of unit trust/OEIC sales
                                                                                                                                                                              • Figure 31: Gross retail sales of unit trusts and OEICs, by distribution channel, 2008-12
                                                                                                                                                                            • Fund platforms account for over two fifths of intermediated sales
                                                                                                                                                                              • Figure 32: Share of gross retail unit trust and OEIC sales, by distribution channel, 2012
                                                                                                                                                                            • The impact of the RDR
                                                                                                                                                                            • Value of Savings and Investments

                                                                                                                                                                              • Key points
                                                                                                                                                                                • Half of adults have less than £10,000 in savings and investments
                                                                                                                                                                                  • Figure 33: Value of savings and investments, May 2013
                                                                                                                                                                                • Older people have higher-valued assets, but young investors should not be overlooked
                                                                                                                                                                                  • Figure 34: Value of savings and investments, by age, May 2013
                                                                                                                                                                                • Affluence is influential, however, starting small can yield big results
                                                                                                                                                                                  • Figure 35: Most popular value of savings and investments, by household income, May 2013
                                                                                                                                                                              • Investment Portfolio

                                                                                                                                                                                • Key points
                                                                                                                                                                                  • British investors show a strong preference towards risk-free and simple products
                                                                                                                                                                                    • Figure 36: Savings and investment portfolio, May 2013
                                                                                                                                                                                  • One in nine adults own a collective investment fund
                                                                                                                                                                                    • Ownership of collective investments is skewed towards older, affluent males
                                                                                                                                                                                      • High-net-worth clients more likely to own collective investment products
                                                                                                                                                                                        • Figure 37: Savings and investment portfolio, by value of savings and investments, May 2013
                                                                                                                                                                                    • Saving and Investing Goals

                                                                                                                                                                                      • Key points
                                                                                                                                                                                        • Emergencies and security top reasons for saving/investing
                                                                                                                                                                                          • Figure 38: Saving and investment goals, May 2013
                                                                                                                                                                                        • Saving and investment goals tend to be age-specific
                                                                                                                                                                                          • Figure 39: Saving and investment goals, by age, May 2013
                                                                                                                                                                                        • Retirement savings become more important later in life
                                                                                                                                                                                          • High-net-worth clients more likely to have a number of savings and investment goals
                                                                                                                                                                                            • Figure 40: Saving and investment goals, by value of savings and investments, May 2013
                                                                                                                                                                                        • Influential Factors When Choosing an Investment Fund

                                                                                                                                                                                          • Key points
                                                                                                                                                                                            • Low fees and charges are the most influential factor for retail investors
                                                                                                                                                                                              • Figure 41: Important factors when choosing an investment fund, May 2013
                                                                                                                                                                                            • Collectives investors have slightly different priorities
                                                                                                                                                                                              • Figure 42: Important factors when choosing an investment fund, by ownership of collective investments, May 2013
                                                                                                                                                                                            • Active versus passive fund management
                                                                                                                                                                                              • Actively managed funds more appealing to high-net-worth savers
                                                                                                                                                                                                • Figure 43: Important factors when choosing an investment fund, by value of savings and investments, May 2013
                                                                                                                                                                                            • Average Length of Time Consumers Hold Investments

                                                                                                                                                                                              • Key points
                                                                                                                                                                                                • Investors tend to keep their holdings for more than a year
                                                                                                                                                                                                  • Figure 44: Average length of time investments held, May 2013
                                                                                                                                                                                                • High-net-worth clients more likely to save for the long term
                                                                                                                                                                                                  • Figure 45: Average length of time investments held, by value of savings and investments, May 2013
                                                                                                                                                                                              • Consumer Attitudes Towards Saving and Investing

                                                                                                                                                                                                • Key Points
                                                                                                                                                                                                  • A large proportion of adults are simply risk averse
                                                                                                                                                                                                    • Figure 46: Attitudes towards investing and investments, May 2013
                                                                                                                                                                                                  • Over-55s are less open to taking risks
                                                                                                                                                                                                    • Figure 47: Agreement with the statement ‘I can’t afford to take any risk with my money’, by age, May 2013
                                                                                                                                                                                                  • Time constraints prevent some adults from investing…
                                                                                                                                                                                                    • Figure 48: Attitudes with the statement ‘I do not have time to choose my own investment’, by collective investment ownership and intentions to purchase, May 2013
                                                                                                                                                                                                  • …but perceptions about costs and affordability are bigger barriers
                                                                                                                                                                                                    • Figure 49: Attitudes towards investing and investments, by collectives ownership, May 2013
                                                                                                                                                                                                  • Adults with specific goals more frustrated by low interest rates
                                                                                                                                                                                                    • Figure 50: Agreement with the statement ‘Low interest rates have made me more interested in investment products, such as collectives and shares’, by saving and investment goals, May 2013
                                                                                                                                                                                                    • Figure 51: Agreement with the statement ‘Low interest rates have made me more interested in investment products, such as collectives and shares’, by saving and investment goals, May 2013 (continued)
                                                                                                                                                                                                • Appendix – Market Size and Forecast

                                                                                                                                                                                                    • Figure 52: Best and worst case forecast of gross retail sales of unit trusts and OEICs (UK domiciled), 2013-18
                                                                                                                                                                                                • Appendix – Value of Savings and Investments

                                                                                                                                                                                                    • Figure 53: Value of savings and investments, by demographics, May 2013
                                                                                                                                                                                                    • Figure 54: Value of savings and investments, by demographics, May 2013 (continued)
                                                                                                                                                                                                • Appendix – Investment Portfolio

                                                                                                                                                                                                    • Figure 55: Ownership of savings account/cash ISAs, by demographics, May 2013
                                                                                                                                                                                                    • Figure 56: Ownership of company pensions, by demographics, May 2013
                                                                                                                                                                                                    • Figure 57: Ownership of NS&I products, by demographics, May 2013
                                                                                                                                                                                                    • Figure 58: Ownership of personal pensions, by demographics, May 2013
                                                                                                                                                                                                    • Figure 59: Ownership of equity-based investment, by demographics, May 2013
                                                                                                                                                                                                    • Figure 60: Ownership of individual company shares, by demographics, May 2013
                                                                                                                                                                                                    • Figure 61: Ownership of collectives, by demographics, May 2013
                                                                                                                                                                                                    • Figure 62: Ownership of investment property, by demographics, May 2013
                                                                                                                                                                                                    • Figure 63: Ownership of with-profits, unit-linked, money market, distribution or guaranteed investment bonds, by demographics, May 2013
                                                                                                                                                                                                    • Figure 64: Ownership of investment trusts, by demographics, May 2013
                                                                                                                                                                                                    • Figure 65: Ownership of unit trusts/OEICs, by demographics, May 2013
                                                                                                                                                                                                    • Figure 66: Ownership of SIPPs, by demographics, May 2013
                                                                                                                                                                                                    • Figure 67: Ownership of financial spread-betting accounts, by demographics, May 2013
                                                                                                                                                                                                    • Figure 68: Ownership of ETFs, by demographics, May 2013
                                                                                                                                                                                                    • Figure 69: Ownership of other savings and investments, by demographics, May 2013
                                                                                                                                                                                                • Appendix – Saving and Investment Goals

                                                                                                                                                                                                    • Figure 70: Most important saving and investment goals, by demographics, May 2013
                                                                                                                                                                                                    • Figure 71: Less important saving and investment goals, by demographics, May 2013
                                                                                                                                                                                                • Appendix – Influential Factors When Choosing an Investment Fund

                                                                                                                                                                                                    • Figure 72: Most important factors when choosing an investment fund, by demographics, May 2013
                                                                                                                                                                                                    • Figure 73: Less important factors when choosing an investment fund, by demographics, May 2013
                                                                                                                                                                                                • Appendix – Average Length of Time Consumers Hold Investments

                                                                                                                                                                                                    • Figure 74: Average length of time investments held, by demographics, May 2013
                                                                                                                                                                                                    • Figure 75: Average length of time investments held, by demographics, May 2013 (continued)
                                                                                                                                                                                                • Appendix – Consumer Attitudes Towards Saving and Investing

                                                                                                                                                                                                    • Figure 76: Attitudes towards investing and investments – I can’t afford to take any risks with my money, by demographics, May 2013
                                                                                                                                                                                                    • Figure 77: Attitudes towards investing and investments – I prefer to save/invest for the long term, by demographics, May 2013
                                                                                                                                                                                                    • Figure 78: Attitudes towards investing and investments – I do not have enough money to make investing worthwhile, by demographics, May 2013
                                                                                                                                                                                                    • Figure 79: Attitudes towards investing and investments – I can’t afford the costs and charges involved with stockmarket investments, by demographics, May 2013
                                                                                                                                                                                                    • Figure 80: Attitudes towards investing and investments – I prefer to make my own investment decisions than use a fund manager to invest on my behalf, by demographics, May 2013
                                                                                                                                                                                                    • Figure 81: Attitudes towards investing and investments – I would look for a fund manager with a proven track record when choosing an investment product, by demographics, May 2013
                                                                                                                                                                                                    • Figure 82: Attitudes towards investing and investments – Low interest rates have made me more interested in investment products such as collectives and shares, by demographics, May 2013
                                                                                                                                                                                                    • Figure 83: Attitudes towards investing and investments – I have a clear investment plan, by demographics, May 2013
                                                                                                                                                                                                    • Figure 84: Attitudes towards investing and investments – I do not have time to choose my own investments, by demographics, May 2013

                                                                                                                                                                                                Companies Covered

                                                                                                                                                                                                • Scottish Widows Bank plc

                                                                                                                                                                                                Collective Investments - UK - July 2013

                                                                                                                                                                                                £1,995.00 (Excl.Tax)