This increase, the firm said, is reflective not only of continued robust economic growth and rising household wealth, but also the potential for new flows as a result of the forthcoming pension changes.
According to EY, roughly £3bn would be added to net AUM flows if investment products captured a quarter of the annuity market.
While it points out that, at an estimated £12bn, “the accessible annuities pot is not revolutionary for the asset management industry”, the changes have indeed been welcomed by asset managers.
“The key point here is not the size of the accessible annuities market today, but how accumulation and decumulation products will develop and grow to meet consumer demands over the medium term,” the firm added.
This echoes recent comments by Schroders’ Robin Stoakley, who told Portfolio Adviser recently that he did not expect the pension changes to be a ‘game changer’
The second key factor likely to affect the wealth and fund management industry over the next few years, says EY, is the growing role asset managers are playing in “financing the real economy”.
“This shift — which is evident across Europe, but is especially prevalent in the UK — was highlighted by a recent EY–sponsored study. The research found that European asset managers hold 23% of European debt securities outstanding, which is equivalent to 32% of the value of European bank lending. Similarly, the value of equity held by European asset managers corresponds to nearly 40% of the free float of European listed firms.
“A combination of risk profiling, retirement demands and economic backdrop will likely see this trend continue.
“In the face of concerns that ever–larger trading volumes in financial markets may carry no benefits for society, this report confirms that the asset management industry has been instrumental in making markets more frictionless places in which to deal. This translates into lower trading costs and higher net performance for all participants,” the firm added.
