Growing interest in passive investment strategies pushes asset management totals to unprecedented levels
In a significant milestone, the UK investment management industry reached a new peak of £10 trillion in total assets under management (AUM) in 2024. This impressive growth, up from £9.1 trillion in 2023, marks a strong recovery from the industry's dip in 2022, where AUM dropped to £8.2 trillion.
The record highs in 2024 were driven primarily by strong market performance, including robust equity returns and improved economic conditions, which boosted investor confidence. Additionally, there was a significant increase in assets managed from the UK on behalf of overseas investors, with overseas client assets surpassing 50% of total AUM for the first time. The sector also benefitted from strong retail investor growth, with retail assets rising to 28% of total assets under management, overtaking pension funds for the first time.
Chris Cummings, chief executive of the Investment Association, hailed the UK government's recent efforts to boost domestic capital through the Leeds Reforms, stating that this signalled a powerful alignment between the government, regulator, and industry. Cummings also expressed optimism about building on the momentum as retail assets continue to take a growing share of industry AUM.
The FTSE 100 index hitting new record highs around the 9300 level, reflecting the resilience and strong returns of UK equities over the year, reinforced the wealth-building potential of UK stocks and contributed positively to industry performance. The pension funds' share of AUM declined partly due to defined benefit scheme wind-downs and the aftermath of the 2022 gilt crisis, shifting asset concentration towards retail and overseas investors.
UK funds under management (FUM) increased by 5% to £1.49 trillion due to improved market returns and investor confidence. Notably, low cost-index products made up 26% of funds under management in 2024, while indexing strategies, a form of passive investment, accounted for 35% of the total UK industry AUM.
Schroders recorded a four per cent increase in AUM in 2024, due to the growing popularity of passive investments. Wealth manager Quilter saw an AUM increase of 12% in 2024. However, active funds have consistently failed to outperform their benchmarks in recent years, and tracker net sales surged for the third consecutive year in 2024, while active sales tumbled.
The growth in AUM reflects a strong market performance, with the industry bouncing back to surpass the previous record levels of 2021. In 2024, UK investment firms managed £990bn of assets for North American investors and £740bn on behalf of Asia-Pacific clients. The IA expects positive global investor sentiment towards the UK to continue, and that it will be critical to its continued success.
Over the past decade, overseas client assets have grown at a faster rate than UK client assets. In 2024, assets managed on behalf of overseas clients surpassed over half of total assets for the first time, accounting for 51% and making up £5.1 trillion of AUM. Net retail inflow rose to £28bn in 2024, more than 50% higher than the previous record of £18.4bn recorded in 2020.
In conclusion, the UK investment management industry's record highs in 2024 were underpinned by strong equity market returns, growing international investor engagement, robust retail investor participation, and overall healthier economic conditions during the year. The industry's continued success is expected to rely on maintaining these positive trends and capitalising on the growing global interest in the UK market.
- The growth in the UK investment management industry's assets under management (AUM) in 2024, reaching £10 trillion, was predominantly due to strong market performance inequities, a boost in economic conditions, and a significant increase in assets managed from the UK on behalf of overseas investors.
- The sector also experienced increased retail investor participation, with retail assets accounting for 28% of the total AUM, surpassing pension funds for the first time.
- Notably, the industry also benefitted from the popularity of passive investments, with low cost-index products making up 26% of funds under management in 2024, and indexing strategies accounting for 35% of the total UK industry AUM.
