A POCKET GUIDE TO

INVESTMENT MANAGEMENT
Investment management in the UK, 2020-21
September 2021
 ABOUT THE IA
The Investment Association (IA) is the trade body
that represents UK investment managers, whose 270 members
collectively manage over £9.4 trillion on behalf of clients.
Our purpose is to ensure investment managers are in the best possible position to:
• Build people’s resilience to financial adversity
• Help people achieve their financial aspirations
• Enable people to maintain a decent standard of living as they grow older
• Contribute to economic growth through the efficient allocation of capital
Our members help to grow people’s savings in a wide range of ways, including through
authorised investment funds (schemes where several investors ‘pool’ their assets and
invest in a professionally managed portfolio), pension funds, and stocks & shares ISAs.
The UK is the second largest investment management centre in the world and manages
over a third (37%) of all investments across Europe. IA members hold in total
nearly 40% of the value of UK publicly listed companies. We use this
collective voice to influence company behaviour and hold
businesses to account.
More information can be found at
www.theia.org
INVESTMENT
MANAGEMENT
TODAY IA MEMBERS
MANAGE A RECORD

Investment management is in the

lifeblood of the UK economy. As this
report shows, it is an industry which
looks after money for three quarters
£9.4TRN
FOR SAVERS IN THIS
of UK households, manages £9.4 trillion COUNTRY AND
for savers in this country and worldwide, WORLDWIDE
and which puts that money to work
across the globe.

It is an industry which is needed more than ever right now.

It is needed to repower businesses and other projects which have been
hit during the pandemic and to shore up household finances for whatever
the future may hold.

It is a necessary part of the UK’s wider economic future, too. As one of

the largest and most international investment centres in the world,
the industry is a vital source of skilled jobs and export earnings for
communities up and down the country. As we build new trading links
with countries across Europe and beyond, this industry will be
a cornerstone of the UK’s place in the world.

PREEMINENT
AS THE
INTERNATIONAL
INVESTMENT CENTER,
THE INDUSTRY IS A VITAL
SOURCE OF SKILLED JOBS AND
EXPORT EARNINGS

3
UK RETAIL SAVERS PUT ALMOST
£1 BILLION A MONTH
ON AVERAGE INTO RESPONSIBLE
INVESTMENT FUNDS DURING 2020

And perhaps most importantly, investment

management is a central part of the greener
economy. Investment managers’ long-term view
means that they focus on threats like climate
change, one of the single biggest systemic risks
facing society and the planet today. Last year in
particular saw a very significant increase in savers
wanting to invest in a sustainable and responsible
way, perhaps because of the increasing urgency
of the climate debate and because the pandemic has
focused attention on the wider impacts of business decisions.

I hope you find this pocket guide a useful snapshot of the role of
investment management today. Much more detailed insight and
information about the roles of the industry can be found in our new
2020/21 Investment Management Survey, at www.theia.org

Chris Cummings
CEO, The Investment Association

4 | A POCKET GUIDE TO INVESTMENT MANAGEMENT

 INVESTMENT

114,000
MANAGERS OWN
NEARLY

40%
OF UK PLC
JOBS ACROSS
THE INDUSTRY

£100
BILLION
£1.7
TRILLION
INCREASE IN ASSETS INVESTED IN THE
MANAGED IN
SCOTLAND UK ECONOMY

£4.2
TRILLION £1 BILLION
MANAGED FOR A MONTH INTO
RESPONSIBLE
OVERSEAS INVESTMENT
INVESTORS FUNDS

£9.4 TRN
MANAGED BY
WORLD’S
LEADING
IA MEMBERS IN
THE UK
£40
BILLION
INTERNATIONAL INVESTED IN UK
INVESTMENT INFRASTRUCTURE
HUB

5
PART ONE:
LOOKING AFTER OTHER
PEOPLE’S MONEY
The investment management investors. The ultimate goal is to
industry has a central role in the provide clients with a basket of
economy, channelling savings into shares, bonds and other assets
long-term investments in order to such as property and infrastructure,
deliver returns for a wide range of which can deliver returns over many
clients, from individual savers in the years without exposing them to
retail market to large institutions undue risk.
such as pension schemes.
The industry’s role goes beyond the
Services to clients involve providing actual investment in different asset
significant expertise in risk classes. Investment managers help
management and giving access to a to ensure that capital markets work
range of assets that would normally effectively for this investment to
be out of reach for individual take place. In doing so, investment

Segregated Pooled investments Active strategies

mandate Some clients pool ‘Active’ management
Some clients (usually their money with other means that the
large institutional clients) clients in funds which investment manager is
instruct investment spread risk and create tracking the performance
managers to invest their economies of scale. of their clients’
money using bespoke Just under half (47%) of investment portfolio
investment strategies. the money managed by and making regular
Over half (53%) of the investment managers is adjustments to the
money managed by pooled. assets within it in order
investment managers is to get better investment
in segregated mandates. returns.


6 | A POCKET GUIDE TO INVESTMENT MANAGEMENT

 managers’ activity contribute to Investment managers are not
efficient markets which price unique in this. Other financial
information correctly and allow institutions and individuals
buyers and sellers to transact. This contribute to capital market
facilitates both primary issuance efficiency, but the industry has
when companies or governments historically been at the heart
are trying to raise money, and of long-term capital allocation,
secondary trading of different whether through shares, bonds or
instruments. Without efficient other assets. As long term holders
markets, market economies cannot of investments, UK investment
grow effectively or may even managers hold UK equities over
destabilise. many years. The industry therefore
has an important responsibility

Index strategies Equities Fixed income

’Index’ management is Equity, often referred to Fixed income refers
where the investment as stocks and shares, is typically to bonds, which
manager holds all of the the ownership stake a are investments that pay
equities or bonds that shareholder holds in a interest. Governments
make up a particular company. If a company and companies issue
index, like the FTSE100, wants to raise capital, it bonds when they need
in the same proportions. can issue equity by listing to borrow money from
The returns will be the shares on markets investors. The money is
similar to the overall such as the London Stock returned to the investor
performance of the Exchange. after a specified period
chosen index. of time.

WWW.THEIA.ORG | 7
to undertake stewardship activity managed for institutions including
over the companies they invest in charities, local government, pension
to protect the value for their clients. funds and insurance companies.
Increasingly, this stewardship Pension funds are the largest of
activity is focusing on wider the institutional clients with two
issues, notably environmental out of those four pounds (43% of
sustainability in the context of all assets under management)
accelerating climate change. belonging to pension savers.
The remaining one in five pounds
IA members managed £9.4 trillion of (20%) is managed for individual
client money in the UK at the end of retail clients.
2020, up 11% on the previous year.
Investment management is
Most money looked after by particularly important for people
investment managers is invested looking to build their pensions and
for institutional clients: nearly four ensure that they are financially
out of every five pounds (79%) is secure in later life. Since the
introduction of auto-enrolment in
workplace pensions in 2012,

IVIS THE PUBLIC REGISTER

The IA’s Institutional Voting The IA’s Public Register, is the world’s
Information Service (IVIS) is a first register tracking shareholder
corporate governance research dissent at listed companies. The
service which analyses FTSE All Share Register details companies in the FTSE
and FTSE Fledging companies against All Share that have received significant
the IA’s investee company guidelines, opposition (20%) by shareholders to
the UK Corporate Governance Code a resolution at the Company’s AGM,
and best practice. IVIS does not or any resolution withdrawn before
provide voting recommendations, a shareholder vote. In doing so, it
instead highlighting issues or helps to identify which companies are
concerns through the colour coding acknowledging shareholder dissent
system, to allow subscribers to make and how they are addressing their
informed voting decisions. shareholders’ concerns.

8 | A POCKET GUIDE TO INVESTMENT MANAGEMENT

pension participation has increased accounting for nearly a third of
across all age groups. The Pension total assets under management
Freedoms introduced in 2015 give compared to one fifth (21%) a
people more choice about what to decade ago. This trend has slowed
do with their money, often meaning since the start of the pandemic.
that they leave it invested for longer,
giving it the chance to grow further. Equities are the most widely held
asset, with nearly two fifths (39%)
This money is managed using of investments made in equities.
active or index strategies, which Fixed income assets are the next
aim to track the returns of an most popular source for investment
index such as the FTSE All Share, with nearly one third (32%) invested
or a combination of the two. Active in this asset.
management remains the most
common approach with nearly
three quarters (72%) of institutional
client assets and 82% of retail
client assets being managed by IA IA MEMBERS MANAGED

£9.4
members on an active basis.

Over the last decade we have

also seen a growth in the use of
index strategies with indexing

TRILLION
OF CLIENT MONEY IN
THE UK AT THE END
OF 2020

9
PART TWO:
POWERING THE ECONOMY
The investment management Investment managers provide
industry plays a pivotal role at the patient capital and take a long-term
heart of the UK economy, looking view because they are managing
after money belonging to savers money for people who may not need
in the UK and around the world to see the fruit of the returns on
and investing it in businesses and their investments for many years, or
infrastructure. even decades, from now.

In total, IA members have invested The most significant part of this

over £1.7 trillion in the UK economy investment in the UK economy
through shares, bonds, property and comes through equities (£950
infrastructure. This figure has held billion this year), providing the vital
steady throughout the pandemic, finance that businesses need to
underlining the importance of the grow. In total, the shares held by
investment management industry’s British investment managers make
role in supporting the UK economy up 39% of the value of UK PLC. £450
through difficult times. billion is also invested in company
debt (sterling corporate bonds).

INVESTMENT
MANAGERS WERE CENTRAL
IN CHANNELLING OVER

£22 BILLION
TO HELP BUSINESSES TO RIDE OUT
THE STORM AND TO
RESHAPE THEMSELVES FOR
THE NEW WORLD

10
IA MEMBER HOLDINGS IN UK ASSET CLASSES

COMMERCIAL
PROPERTY
£235bn

IA
UK EQUITIES MEMBERS INFRASTRUCTURE
£950bn £40bn

STERLING
CORPORATE BONDS
£450bn

This long-term support has been shares in listed companies and

particularly important to British bonds but there is an increasing use
businesses during the pandemic, of ‘private markets’. Private markets
when companies across the are investments made in assets
economy have needed fresh not otherwise traded on a public
capital to weather the storm and to exchange or stock market. These
reshape their activity for the new encompass a range of investable
world. In the six months after the opportunities such as directly
UK’s initial lockdown in March 2020, lending to companies, and investing
investment managers were central in infrastructure.
in channelling over £22 billion to
help businesses to ride out the Over the past decade, growth in
storm and to reshape themselves private markets has been a highly
for the new world. significant feature of international
capital markets, with assets almost
Investment management activity doubling globally in the five years
has historically focused on more since 2015 from $4.2 to $8.0 trillion.
traditional asset classes such as

WWW.THEIA.ORG | 11
Demand for private market A strong pipeline of listed
investments is being driven companies is vital to the UK: it
by investors searching for means that companies have a
opportunities to further diversify mechanism to find the funds they
investment portfolios with a view need to grow; spreads wealth
to achieving both solid, long-term by giving people around the
returns and yield in a low interest country the opportunity to invest
rate environment. Private markets in successful businesses; and
have long presented an attractive cements the UK’s place as a leading
source of investment opportunity financial centre.
for pension schemes and other
institutional customers. As the needs of companies looking
to list changes, we need to consider
Private markets assets tend to be whether the UK’s listings regime
very much less liquid than their should adapt. The IA supports the
public market counterparts, which government’s work in this area
has historically restricted access (through Lord Hill’s listing review)
for a broader group of investors. to attract a diverse range of high-
The IA is working with government quality, innovative companies from
and the regulators to consider how high growth sectors to list and
to widen access. In particular, the operate in the UK. In particular it
proposal for a Long Term Asset will be important to ensure the
Fund (LTAF) has been developed UK is the leading global hub for
by the IA, working with other sustainable investment so that
stakeholders and government, to those companies that list here
give investors more choice in how deliver outstanding long-term
they put money into assets such as returns for savers and investors.
infrastructure.

Private markets have also been

pushed to the fore because the
decreasing number of companies
being publicly listed is leading
investors to search for other
opportunities.

12 | A POCKET GUIDE TO INVESTMENT MANAGEMENT

Investing in infrastructure
One of the ways in which investment PUBLIC BUILDINGS

managers can help us to Build Back RENEWABLE ENERGY

Better to this is through investment
UTILITIES
in infrastructure projects. In (GAS/ELECTRIC)
2020, UK investment managers ROAD/RAIL/AIR/PORT
held an estimated £40 billion in
STUDENT
infrastructure projects, a figure which ACCOMMODATION
is up £5 billion in the last two years.
TELECOMMUNICATIONS
Three quarters of this investment is
WASTE/WATER
in economic infrastructure such MANAGEMENT
as energy, transport and
environmental projects. The
remaining quarter is invested
in projects which provide a
social benefit, such as schools,
hospitals or social housing.

This map shows the types of

infrastructure projects facilitated
by IA members on behalf of
their clients, spanning the UK. Renewable
energy projects make up a significant
proportion of these programmes.

Not every project can be shown on a

map: every city, town and village in the
country benefits from investment in
projects such as waste and water services,
broadband upgrades, and transport networks.

WWW.THEIA.ORG | 13
PART THREE:
NAVIGATING THE PANDEMIC
2020 saw the economy challenged of the spread of the virus and
like in no other year. The pandemic the corresponding containment
itself fundamentally altered the measures caused a ‘dash for cash’
way that we live, work and spend, in March as investors sold off
as lockdowns shut shops and saw assets across asset classes in order
many of us work from home. The to build up their liquid reserves.
enormous changes also started to Bond yields rose sharply and
affect the ways that some people large-scale redemption requests
considered their financial futures. from Money Market Funds (MMFs)
caused severe strains in the
Though most markets recovered commercial paper market.
by the end of the year – even
reaching record highs – equity In the UK, retail investors pulled
markets suffered one of the a record £9.7 billion from funds in
sharpest declines on record as March, just £200 million less than
lockdowns began. The acceleration total net retail sales in 2019. Three
quarters of the March outflow was
from bond funds, traditionally seen
as a safe asset class. As equity
valuations plummeted, balanced
investment portfolios of stocks and
bonds were pushed significantly
out of alignment making them
overweight in bonds. Retail investors
needing cash were also loath to sell
equities at rock bottom valuations,
so they sold out of bonds. The
substantial intervention from
central banks around the world
was critical in restoring stability
to global markets. The massive
scale of quantitative easing (QE), in
essence large-scale bond buying
programmes, helped to drive greater
liquidity and improve price stability
in the bond markets and to stabilise

14
equity valuations. Central banks had
learnt the lessons from the Global
Financial Crisis over a decade earlier
and quick decisions on a package
of emergency monetary policy
measures, including interest rate
cuts, helped to ensure a relatively
swift recovery in the capital markets.
Retail funds returned to inflow in
April, with the outflow from bond
funds fully reversed by August 2020.

Investors’ confidence improved

through 2020. In November, Pfizer
BioNTech announced the results to save more as lockdowns curtailed
of its successful vaccine trial, spending such as on commutes and
which offered hope that the virus leisure. Bank of England figures
could be contained, and economic show that cash deposits from UK
restrictions eased. Inflows from households were £101 billion in
retail investors into funds reached 2020, an increase of 82% on 2019.
a monthly record of £8.3 billion
in November as markets surged. This has given many people the
The November inflow helped to scope to consider investing for
push retail fund inflows in 2020 to the first time – interest rates also
£30.8 billion, which is the second remain at record lows, making cash
highest total ever recorded, and saving less attractive. For some,
demonstrates the speed and the especially those who find that they
strength of the recovery in investor have more time available during
confidence. Overall global stock lockdowns, this has also meant
markets ended 2020 up 11%. considering alternative routes to
investing through day trading or
As well as affecting markets, the cryptocurrencies introducing them
pandemic changed the way that to concepts that are fundamental
many people think about and plan to investing, such as risk and
for their financial futures. Although reward, for the first time. This could
many people saw their incomes hit help to sow the seeds of a new
hard during 2020, others were able generation of investors.

WWW.THEIA.ORG | 15
PART FOUR:
A SUSTAINABLE FUTURE
Investment managers’ long-term government to create investable
view means that they focus on schemes that support low carbon
threats like climate change which growth.
have the potential to undermine
our economy. 2020 in particular has seen a very
significant increase in savers wanting
Climate change is one of the single to invest in a sustainable and
biggest systemic risks facing society responsible way, perhaps because of
and the planet today. If this is not the increasing urgency of the climate
addressed it will fundamentally debate and because the pandemic
undermine the basis on which our has focused attention on the wider
economy, businesses and jobs impacts of business
are founded. For the sake of the decisions.
ordinary savers and pension funds
we serve, we must change course
now to protect the value of their
long-term investments.

But this isn’t just a story about

managing risk. As long-term
investors there is significant
economic opportunity to be found in
the new industries and technologies
that are emerging to tackle climate
change and to adapt to its impacts.

The investment management

industry will play a vital role in
financing the transition to a cleaner
and more sustainable economy. To
do this, investment managers are
helping the companies they invest in
to become more transparent about
their impact on the environment
and supporting businesses and

16 | A POCKET GUIDE TO INVESTMENT MANAGEMENT

UK retail savers put almost
£1 billion a month on average into SUPPORTING
responsible investment funds
during 2020, showing how important
FINTECH
investing with environmental,
social and governance (ESG) The IA established a FinTech hub
considerations in mind has become. and accelerator, Engine, in 2018 to
create the conditions in which UK
Nearly half (49%) of all industry FinTech can flourish.
assets are now managed according Engine is boosting the investment
to ‘ESG integration’ criteria, which
management industry’s adoption
involved the systematic and
of new technologies and helping
explicit inclusion of environmental,
investment managers to identify
social and governance factors into
new investment opportunities,
investment analysis and investment
work more efficiently and cut
decisions. This figure has risen from
costs, ultimately benefiting our
37% in just a year.
customers. In 2019 this was joined
The industry has its own role to by Engine Birmingham to boost the
play in this of course. In July 2021 West Midlands’ burgeoning FinTech
the IA was announced as the first sector.
supporting partner to the Net Zero The pandemic has accelerated
Asset Managers initiative (NZAM), the conversation about the
an international group of asset transformative role that technology
managers committed to supporting will most likely play over the longer
the goal of net zero greenhouse gas term, with 20% of the FinTech’s
emissions by 2050 at the very latest. currently taking part in the Engine
From a standing start in December programme exclusively focused
2020, IA member firms with AUM of on making responsible investment
more than £6.1 trillion (two-thirds of easier.
UK AUM) have now signed up to the
NZAM.

We will be supporting government’s

work here, too. We strongly welcome
the government’s plan to issue
a Green Gilt, as a signal of the
importance they place on the UK
as a home for green investment.
The gilts must now be designed to
meet both the government’s funding
needs and the needs of savers
looking to invest for the future.

WWW.THEIA.ORG | 17
PART FIVE:
OUR UK FOOTPRINT
The UK investment management a training programme called
industry provides high-quality jobs, Investment20/20.
with around 114,000 people working
across the industry. Since it was founded in 2013,
Investment20/20 has supported
The roles in the investment over 2,000 trainees to start their
management industry are varied careers in investment management,
and while it is a great industry for with three quarters of trainees
people with STEM training, jobs in going on to permanent jobs in the
cutting edge areas like financial industry.
technology and responsible
investment are suitable for people In 2020 the IA also became the
from a wide range of backgrounds. only industry body in the UK to
provide a gateway to the Kickstart
The Investment Association Programme, aimed at supporting
provides outreach and career young people hit by the pandemic
opportunities to those looking at into successful careers, without
investing in our future for their taking any public money.
first jobs in the industry through

A SCOTTISH CENTRE
OF EXCELLENCE
Financial services in Scotland enjoy a managers, over
centuries-old heritage which developed one fifth (21%)
alongside London’s financial centre. of assets are
Some of the UK’s and the world’s largest managed by firms
investment management businesses with headquarters
were established and are still in Scotland.
headquartered in Scotland. Edinburgh
Around 13,000
in particular plays a key role in UK
people work in investment
investment management.
management in Scotland. Most
£690 billion of assets are managed in employment is in Edinburgh’s world-class
Scotland, up £100 billion in the last financial services hub, but high-quality
year. Of UK-headquartered investment jobs are spread across the nation.
18 | A POCKET GUIDE TO INVESTMENT MANAGEMENT
PART SIX:
GLOBAL REACH
UK investment management is Over £4.2 trillion is managed in the
world leading. The £9.4 trillion in UK on behalf of overseas savers,
total that UK investment managers as of the end of 2020, equivalent to
look after makes the UK the second 44% of total assets.
largest investment centre in the
world, following only the US in scale, The UK is one of the most
and bigger than the next three international centres in the world,
centres in Europe (France, Germany both in terms of the customers and
and Switzerland) combined. businesses we serve and the assets
that we invest in.

FOUR MEASURES OF A GLOBAL INDUSTRY

CUSTOMERS MARKETS
44% of total assets 74% of the shares
managed in the UK are managed in the
for overseas customers. UK are invested in
Over half of those are in overseas markets – for
the rest of Europe. domestic and overseas
customers.

COMPANIES ECONOMIC
The UK attracts firms CONTRIBUTION
from around the 4.5% of total UK
world. Companies service exports
headquartered outside from the investment
the UK are responsible management industry.
for 60% of total assets
managed here.

WWW.THEIA.ORG | 19
The UK has many natural right. We already manage
advantages which have helped £2.4 trillion for clients elsewhere
us to build this position, among in Europe; £860 billion for North
them our legal system, time zone American clients; and £600 billion
and the English language. But the for clients in Asia.
right regulatory system, skills and
outlook is what can transform this This brings immense benefits to
into true competitiveness. communities all across the UK. The
scale and success of the industry
The UK has immense international contributes directly to the economy:
success to build on if we get this the industry responsible for

ASSETS MANAGED FOR OVERSEAS CLIENTS

Europe
£2.4trn
North
America
Middle
£860bn East Asia
£220bn £600bn

Latin
America
Africa
£30bn
£20bn

20 | A POCKET GUIDE TO INVESTMENT MANAGEMENT

£6.3 billion of net exports in 2020, and Singapore) are beginning
4.5% of the total. to challenge. If the UK does not
stay innovative and welcoming to
There are many indirect benefits, international business, this risks
too. Having a world leading being lost.
investment sector right here in the
UK makes it easier for British savers Now is therefore the right time to
to access the very best products cement the UK’s position, making
and expertise. It also means that sure that we are more attractive
investment decisions are made not only than the traditional
close to the UK businesses and financial centres in Europe and
infrastructure projects which rely North America, but also from newer
on the capital channelled into them locations which might be perceived
by investment managers. as more dynamic: today we are
competing globally not just against
But this position is not automatic, established markets.
and other leading centres
(notably Shanghai, Hong Kong

THE INDUSTRY
RESPONSIBLE FOR

£6.3
BILLION
OF NET EXPORTS IN 2020

WWW.THEIA.ORG | 21
The Investment Association
Camomile Court, 23 Camomile Street, London, EC3A 7LL
www.theia.org
@InvAssoc

September 2021

© The Investment Association (2021). All rights reserved.

No reproduction without permission of The Investment Association.