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Collective Investments - UK - July 2014

"To many people, the very word 'risk' implies that they are likely to lose their money. This needs to change. One of the most powerful things that providers can do to reduce people's anxiety about risk, is to encourage them to think long term."

– George Zaborowski, Senior Analyst – Financial Services

This report looks at the following issues:

  • What’s likely to happen when interest rates finally start to rise?
  • Changing the way people think about risk
  • More investors will require guidance in the DIY investment era

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Growth in gross retail sales of open-ended funds set to continue in 2014 and beyond
              • Figure 1: Forecast for gross retail sales of unit trusts and OEICs (UK-domiciled), 2009-19
            • New retail sales of investment trusts rise in 2013
              • Large majority of investment funds sold via intermediaries
                • Figure 2: Gross retail sales of unit trusts and OEICs, by distribution channel, 2009-13
              • Market factors
                • Improvements in the economic environment helping to boost interest in investing
                  • RDR altering distribution mechanics of retail investment products
                    • EU regulatory update
                      • Companies, brands and innovation
                        • Market share is concentrated among top 10 fund management firms
                          • Collective investment and investment ISA adspend rises over the 2013/2014 period
                            • Who’s innovating?
                              • The consumer
                                • Value of savings and investments
                                  • Figure 3: Value of savings and investments, May 2014
                                • Investment product ownership
                                  • Figure 4: Investment product ownership, May 2014
                                • Planned investment product ownership
                                  • Figure 5: Planned investment product ownership, May 2014
                                • Investment goals
                                  • Figure 6: Investment goals, May 2014
                                • Investment plans
                                  • Figure 7: Investment plans over the next 12 months, May 2014
                                • Choosing an investment fund
                                  • Figure 8: Factors influencing choice of investment fund, May 2014
                                • Attitudes towards saving and investing
                                  • Figure 9: Attitudes towards saving and investing, May 2014
                                • Barriers to investing
                                  • Figure 10: Barriers to investment product ownership, May 2014
                                • What we think
                                • Issues and Insights

                                    • What’s likely to happen when interest rates finally start to rise?
                                      • The facts
                                        • The implications
                                          • Changing the way people think about risk
                                            • The facts
                                              • The implications
                                                • More investors will require guidance in the DIY investment era
                                                  • The facts
                                                    • The implications
                                                    • Trend Application

                                                      • Developing a well thought-out investment plan and sticking to it
                                                        • Simplifying fund selection by ranking funds by degree of complexity
                                                          • Investing in foreign markets like a local
                                                          • Market Drivers

                                                            • Key points
                                                              • Rising FTSE helping to boost demand for retail investment products
                                                                • Figure 11: FTSE 100 and FTSE All-Share – Daily index movements, January 2007-May 2014
                                                              • A rise in the base rate may hurt equity-based investment funds sales
                                                                • Figure 12: Average annual changes in the Bank of England base rate, CPI and RPI – UK, April 2009- April 2014
                                                              • Easing pressure on incomes should free up more cash for investing
                                                                • Figure 13: Monthly change in RPI and average weekly earnings, March 2009-March 2014
                                                              • Investors can now contribute up to £15,000 annually in a NISA
                                                                • RDR reshaping the mechanics of investment product distribution
                                                                  • Investment trusts and ETFs now more likely to be considered
                                                                    • FCA scraps cash rebates on platforms
                                                                      • MiFID II update
                                                                        • PRIPs Key Information Document (KID) approved by EU
                                                                        • Who’s Innovating?

                                                                          • Key points
                                                                            • J.P. Morgan launches iPad app and multi-manager fund reporting tool
                                                                              • New ETF provides UK investors direct access to top Chinese companies
                                                                                • TD Direct launches ‘Fund Selector’ tool
                                                                                  • F&C launches capital protected RDR compliant share class
                                                                                    • Financial Express launches DIY investment platform Trustnet Direct
                                                                                    • Market Size and Forecast

                                                                                      • Key points
                                                                                        • Open-ended funds
                                                                                          • Value of retail sales of unit trusts and OEICs – UK-domiciled
                                                                                            • Figure 14: Value of retail sales of unit trusts and OEICs – UK-domiciled, 2009-13
                                                                                          • Market prospects as of June 2014
                                                                                            • Five-year forecast
                                                                                              • Figure 15: Forecast for gross retail sales of unit trusts and OEICs (UK-domiciled), 2009-19
                                                                                              • Figure 16: Forecast of gross retail sales of unit trusts and OEICs (UK-domiciled), at current and constant prices, 2009-19
                                                                                            • Forecast methodology
                                                                                              • Fan chart explanation
                                                                                                • Closed-ended funds
                                                                                                  • New retail investment trusts sales rise by 4% in 2013
                                                                                                    • Figure 17: Volume of NEW regulated retail sales of investment trusts, unit trust/OEICs and stocks and shares ISAs, 2009-13
                                                                                                  • Total value of investment trust assets under management on the rise
                                                                                                    • Figure 18: Number of closed-ended investment companies and value of assets, April 2012-April 2014
                                                                                                • Segment Performance

                                                                                                  • Key points
                                                                                                    • Net retail sales of equity and property unit trusts and OEICs soar in 2013
                                                                                                      • Figure 19: Net retail unit trust/OEIC fund sales (UK-domiciled), by asset class, 2009-13
                                                                                                    • Unit trust/OEIC funds under management (UK-domiciled only)
                                                                                                      • Figure 20: Unit trust/OEIC funds under management (UK-domiciled only), by asset class, 2009-13 (year-end)
                                                                                                  • Market Share

                                                                                                    • Key points
                                                                                                      • Invesco Perpetual and M&G are the largest retail fund management firms
                                                                                                        • Figure 21: Top 20 fund managers, by retail and private client funds under management (minimum lump sum is £50,000 or less), April 2012-April 2014
                                                                                                      • St James’s Place takes over the top spot in the ISA fund market
                                                                                                        • Figure 22: Top ten ISA fund managers, by ISA and PEP funds under management, April 2012-April 2014
                                                                                                      • J.P. Morgan maintains its position as the top investment trust provider
                                                                                                        • Figure 23: Top 20 investment management groups, ranked by assets under management, April 2014
                                                                                                    • Companies and Products

                                                                                                      • Top three unit trust/OEIC fund managers
                                                                                                        • Invesco Perpetual
                                                                                                          • Unit trust/OEIC retail funds under management as at 30 April 2014
                                                                                                            • Company description
                                                                                                              • Product range
                                                                                                                • Recent activity
                                                                                                                  • M&G Securities
                                                                                                                    • Unit trust/OEIC retail funds under management as at 30 April 2014
                                                                                                                      • Company description
                                                                                                                        • Product range
                                                                                                                          • Recent activity
                                                                                                                            • Recent promotional activity
                                                                                                                              • BNY Mellon
                                                                                                                                • Unit trust/OEIC retail funds under management as at 30 April 2014
                                                                                                                                  • Company description
                                                                                                                                    • Product range
                                                                                                                                      • Recent activity
                                                                                                                                        • Recent promotional activity
                                                                                                                                          • Top three investment trust managers
                                                                                                                                            • J.P. Morgan Asset Management
                                                                                                                                              • Investment trust assets under management as at 30 April 2014
                                                                                                                                                • Company description
                                                                                                                                                  • Product range
                                                                                                                                                    • Recent activity
                                                                                                                                                      • Recent promotional activity
                                                                                                                                                        • F&C Management
                                                                                                                                                          • Investment trust assets under management as at 30 April 2014
                                                                                                                                                            • Company description
                                                                                                                                                              • Product range
                                                                                                                                                                • Recent activity
                                                                                                                                                                  • Recent promotional activity
                                                                                                                                                                    • Aberdeen Asset Managers
                                                                                                                                                                      • Investment trust assets under management as at 30 April 2014
                                                                                                                                                                        • Company description
                                                                                                                                                                          • Product range
                                                                                                                                                                            • Recent activity
                                                                                                                                                                              • Recent promotional activity
                                                                                                                                                                              • Brand Communication and Promotion

                                                                                                                                                                                • Key points
                                                                                                                                                                                  • Adspend on collectives and investment ISAs up 15% in year to April 2014
                                                                                                                                                                                    • Figure 24: Advertising expenditure on collective investments and investment ISAs, 2011/12-2013/14
                                                                                                                                                                                  • Top advertisers of collective investments and investment ISAs
                                                                                                                                                                                    • Figure 25: Top advertisers of collective investments and investment ISAs, 2011/12-2013/14
                                                                                                                                                                                  • Advertising expenditure on collective investments and investment ISAs
                                                                                                                                                                                    • Figure 26: Advertising expenditure on collective investments and investment ISAs, by media type, 2011-12 and 2013-14
                                                                                                                                                                                  • A note on adspend
                                                                                                                                                                                  • Channels to Market

                                                                                                                                                                                    • Key points
                                                                                                                                                                                      • 92% of gross retail sales of unit trusts and OEICs are intermediated
                                                                                                                                                                                        • Figure 27: Gross retail sales of unit trusts and OEICs, by distribution channel, 2009-13
                                                                                                                                                                                      • Majority of intermediated sales are via fund platforms
                                                                                                                                                                                        • Figure 28: Share of gross retail unit trust and OEIC sales, by distribution channel, 2013
                                                                                                                                                                                    • Value of Savings and Investments

                                                                                                                                                                                      • Key points
                                                                                                                                                                                        • Three in 10 adults have £10,000 or more available to invest
                                                                                                                                                                                          • Figure 29: Value of savings and investments, May 2014
                                                                                                                                                                                        • Wealth acquisition tends to be a decades-long pursuit
                                                                                                                                                                                          • Figure 30: Value of savings and investments, by gender, age, socio-economic group and household income, May 2014
                                                                                                                                                                                      • Investment Ownership

                                                                                                                                                                                        • Key points
                                                                                                                                                                                          • Just one in eight adults own a collective investment
                                                                                                                                                                                            • Figure 31: Investment ownership, May 2014
                                                                                                                                                                                          • Investment ownership strongly skewed toward the well-off
                                                                                                                                                                                            • Collective investment ownership rises along with savings levels
                                                                                                                                                                                              • Figure 32: Investment ownership, by value of savings and investments, May 2014
                                                                                                                                                                                          • Planned Investment Ownership

                                                                                                                                                                                            • Key points
                                                                                                                                                                                              • Two in five adults plan to take out an investment in the next year
                                                                                                                                                                                                • Figure 33: Planned investment ownership, May 2014
                                                                                                                                                                                              • Planned purchase activity highest among the wealthy and under-35s
                                                                                                                                                                                                • Figure 34: Planned investment ownership, by value of savings and investments, May 2014
                                                                                                                                                                                              • Three fifths who already own a collective investment plan to buy more
                                                                                                                                                                                                • Figure 35: Planned investment ownership, by existing investment ownership, May 2014
                                                                                                                                                                                                • Figure 36: Planned investment ownership, by existing investment ownership, May 2014 (continued)
                                                                                                                                                                                            • Investment Goals

                                                                                                                                                                                              • Key points
                                                                                                                                                                                                • The number one reason people invest is to growth their wealth
                                                                                                                                                                                                  • Figure 37: Investment goals, May 2014
                                                                                                                                                                                                • Investment priorities alter with age
                                                                                                                                                                                                  • Greater levels of affluence lead to a greater focus on wealth preservation
                                                                                                                                                                                                    • Investment goals change as the value of savings and investments rises
                                                                                                                                                                                                      • Figure 38: Investment goals, by value of savings and investments, May 2014
                                                                                                                                                                                                  • Investment Plans

                                                                                                                                                                                                    • Key points
                                                                                                                                                                                                      • Two in five investors plan to add to their investments in the next year
                                                                                                                                                                                                        • Figure 39: Investment plans over the next 12 months, May 2014
                                                                                                                                                                                                      • Older and affluent keen to make the most of the higher ISA allowance
                                                                                                                                                                                                        • Younger investors looking to change things in the coming year
                                                                                                                                                                                                          • Higher levels of planned activity among those with over £50K in savings
                                                                                                                                                                                                            • Figure 40: Investment plans over the next 12 months, by value of savings and investments, May 2014
                                                                                                                                                                                                        • Choosing an Investment Fund

                                                                                                                                                                                                          • Key points
                                                                                                                                                                                                            • Low annual fees and charges the priority when choosing a fund
                                                                                                                                                                                                              • Figure 41: Factors influencing choice of investment fund, May 2014
                                                                                                                                                                                                            • Track record generally seen as more important than brand…
                                                                                                                                                                                                              • …but a well-known brand and star-manager still holds a lot of sway
                                                                                                                                                                                                                • Under-35s and Londoners attracted by the notion of ethical investing
                                                                                                                                                                                                                  • Interest in foreign markets exposure strongest among the more affluent
                                                                                                                                                                                                                    • Figure 42: Factors influencing choice of investment fund, by value of savings and investments, May 2014
                                                                                                                                                                                                                  • Those with no investment experience value brand name
                                                                                                                                                                                                                    • Figure 43: Factors influencing choice of investment fund, by collective investment ownership, May 2014
                                                                                                                                                                                                                • Attitudes towards Saving and Investing

                                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                                    • Low interest rates helping to boost interest in collective investments
                                                                                                                                                                                                                      • Figure 44: Attitudes towards saving and investing, May 2014
                                                                                                                                                                                                                    • Appetite for risk appears elevated at present
                                                                                                                                                                                                                      • A rise in the base rate may reduce demand for investment products
                                                                                                                                                                                                                        • In an era of DIY investing more investors will need guidance
                                                                                                                                                                                                                          • Figure 45: Attitudes towards saving and investing, by value of savings and investments, May 2014
                                                                                                                                                                                                                        • The active versus passive fund management debate
                                                                                                                                                                                                                          • Figure 46: Attitudes towards saving and investing, by collective investment ownership, May 2014
                                                                                                                                                                                                                          • Figure 47: Attitudes towards saving and investing, by value of savings and investments, May 2014
                                                                                                                                                                                                                      • Barriers to Investing

                                                                                                                                                                                                                        • Key points
                                                                                                                                                                                                                          • Lack of money and aversion to risk the top barriers to investing
                                                                                                                                                                                                                            • Figure 48: Barriers to investment product ownership, May 2014
                                                                                                                                                                                                                          • Age, gender and income dictate what is likely to be a barrier
                                                                                                                                                                                                                            • Those with money don’t invest due to a preference for safer products
                                                                                                                                                                                                                              • Figure 49: Barriers to investment product ownership, by value of savings and investments, May 2014
                                                                                                                                                                                                                            • It’s okay to start small
                                                                                                                                                                                                                              • A longer-term mindset can help people think differently about risk
                                                                                                                                                                                                                                • Time constraints more likely to be a barrier for the young or better-off
                                                                                                                                                                                                                                • Appendix – Market Size and Forecast

                                                                                                                                                                                                                                    • Figure 50: Best and worst case forecast of gross retail sales of unit trusts and OEICs (UK-domiciled), 2014-19
                                                                                                                                                                                                                                • Appendix – Value of Savings and Investments

                                                                                                                                                                                                                                    • Figure 51: Value of savings and investments, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 52: Value of savings and investments, by demographics, continued, May 2014
                                                                                                                                                                                                                                    • Figure 53: Value of savings and investments, by demographics, continued, May 2014
                                                                                                                                                                                                                                • Appendix – Investment Ownership

                                                                                                                                                                                                                                    • Figure 54: Investment ownership, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 55: Investment ownership, by demographics, May 2014 (continued)
                                                                                                                                                                                                                                    • Figure 56: Investment ownership, by demographics, May 2014 (continued)
                                                                                                                                                                                                                                  • Filtered on adults who own an investment
                                                                                                                                                                                                                                    • Figure 57: Investment ownership, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 58: Investment ownership, by demographics, May 2014 (continued)
                                                                                                                                                                                                                                    • Figure 59: Investment ownership, by demographics, May 2014 (continued)
                                                                                                                                                                                                                                • Appendix – Planned Investment Ownership

                                                                                                                                                                                                                                    • Figure 60: Planned investment ownership, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 61: Planned investment ownership, by demographics, May 2014 (continued)
                                                                                                                                                                                                                                    • Figure 62: Planned investment ownership, by demographics, continued, May 2014
                                                                                                                                                                                                                                  • Filtered on all adults who plan to take out an investment
                                                                                                                                                                                                                                    • Figure 63: Planned investment ownership, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 64: Planned investment ownership, by demographics, May 2014 (continued)
                                                                                                                                                                                                                                    • Figure 65: Planned investment ownership, by demographics, May 2014 (continued)
                                                                                                                                                                                                                                • Appendix – Investment Goals

                                                                                                                                                                                                                                    • Figure 66: Investment goals, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 67: Investment goals, by demographics, continued, May 2014
                                                                                                                                                                                                                                    • Figure 68: Investment goals, by demographics, continued, May 2014
                                                                                                                                                                                                                                • Appendix – Investment Plans

                                                                                                                                                                                                                                    • Figure 69: Investment plans over the next 12 months, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 70: Investment plans over the next 12 months, by demographics, continued, May 2014
                                                                                                                                                                                                                                    • Figure 71: Investment plans over the next 12 months, by demographics, May 2014 (continued)
                                                                                                                                                                                                                                • Appendix – Choosing an Investment Fund

                                                                                                                                                                                                                                    • Figure 72: Factors influencing choice of investment fund, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 73: Factors influencing choice of investment fund, by demographics, May 2014 (continued)
                                                                                                                                                                                                                                    • Figure 74: Factors influencing choice of investment fund, by demographics, May 2014 (continued)
                                                                                                                                                                                                                                • Appendix – Attitudes towards Saving and Investing

                                                                                                                                                                                                                                    • Figure 75: Attitudes towards saving and investing, by collective investment ownership, May 2014
                                                                                                                                                                                                                                    • Figure 76: Attitudes towards saving and investing, by value of savings and investments, May 2014
                                                                                                                                                                                                                                    • Figure 77: Attitudes towards saving and investing – Low interest rates on savings accounts have made me more interested in investment products, such as collectives and shares, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 78: Attitudes towards saving and investing – I prefer to save/invest for the long term, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 79: Attitudes towards saving and investing – I’d be a more active investor if fees and charges were lower, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 80: Attitudes towards saving and investing – The improvement in stock market performance in recent years has made me more interested in investment products, such as collectives and shares, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 81: Attitudes towards saving and investing – I have a well thought out savings/investment plan, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 82: Attitudes towards saving and investing – I’m prepared to take on more risk in order to achieve higher returns, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 83: Attitudes towards saving and investing – It’s better to buy an investment fund than buy individual company shares, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 84: Attitudes towards saving and investing – It’s better to buy investment funds that track the performance of an index, than buy funds that are actively managed by a fund manager, by demographics, May 2014
                                                                                                                                                                                                                                • Appendix – Barriers to Investing

                                                                                                                                                                                                                                    • Figure 85: Barriers to investment product ownership, by demographics, May 2014
                                                                                                                                                                                                                                    • Figure 86: Barriers to investment product ownership, by demographics, continued, May 2014
                                                                                                                                                                                                                                    • Figure 87: Barriers to investment product ownership, by demographics, May 2014 (continued)

                                                                                                                                                                                                                                Companies Covered

                                                                                                                                                                                                                                • Aberdeen Asset Management PLC
                                                                                                                                                                                                                                • Bank of New York Mellon Corporation, The
                                                                                                                                                                                                                                • F&C Asset Management plc
                                                                                                                                                                                                                                • Invesco Perpetual
                                                                                                                                                                                                                                • London Stock Exchange plc
                                                                                                                                                                                                                                • Scottish Widows Investment Partnership Ltd

                                                                                                                                                                                                                                Collective Investments - UK - July 2014

                                                                                                                                                                                                                                US $2,583.33 (Excl.Tax)