UK asset management industry AUM to stagnate

The UK asset management industry faces years of sluggish growth due to increased investor uncertainty and a deteriorating economic outlook post-Brexit, it has been claimed.

In its latest briefing note, EY suggests a toxic cocktail of low interest rates, volatility in financial markets, and stagnating household wealth will mean assets under management will likely rise by only 1.5% annually from now until 2019 at least.

Fund flows into ‘safe haven’ assets such as bonds are likely to outpace other asset classes, despite slower economic growth and the prospect of more quantitative easing suppressing yields even further, the firm stated.  Commercial real estate, already victim to much turbulence this year, will also potentially see significant outflows over the next three years.

However, EY predict that a shift away from equities will produce cheaper share prices, which will in turn support an equity recover by 2019.

A year ago, EY predicted the UK asset management industry could reach assets under management (AUM) of £1.2 trillion (€1.7 trillion) by 2019. EY were not the only consultancy to have forecasted rising assets for UK asset managers.

Despite these headwinds, Omar Ali, managing partner in EY’s financial services division, urged asset management professionals not to lose hope. He said the financial services industry has contended with hostile conditions over the past eight years, and the experience meant it was among the sectors best placed to deal with the challenges ahead.

Nonetheless, he added that each financial services sector faced “unique pressures”, and the landscape in which firms are operating has fundamentally altered.

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