UK Collective Investments 2007

Introduction

This report provides comprehensive analysis of UK collective investments, focusing in particular on unit trusts, OEICS and investment trusts. Insight is also given into the prominent issues affecting these investments as well as the latest regulatory developments; all of which will prove essential towards understanding the current shape of the market and how this profile may change going forward.

Scope

UK unit trusts/OEICS and Investment Trusts Historic data from 2002-2006 and forecast to 2011 A selection of consumer data covering approaches to collective investments Ranking of top competitors in the collective investment market

Highlights

Retail assets held in collective investment vehicles have shown a compound annual growth rate of close to 20% for the past five years, which is more than double the rate of other retail S&I products. Among collective investments, unit trusts and OEICs continue to be the dominant products in terms of funds under management, largely due to their open-ended nature, which is preferred by consumers over closed-ended investment trusts. Following the decline in investment trust balances as a result of the equity market downturn in 2002, the investment trust market has now recovered and both non-retail and retail sectors are growing at a steady pace. However, they continue to make up a very small proportion of retail savings & investments balances in the UK.

Reasons to Purchase

Assess the relative size and industry dynamics the UK collective investment markets to clearly identify the key strategic issues Gain a detailed view of competitive developments including comprehensive competitor data and market share information Access independent forecasts of UK unit trusts/OEICS and Investment Trusts to identify product sectors for future investment

Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Collective Investments have taken the market share of other products but are only the 3rd largest product group in the UK retail savings & investments market 2
OEICs are the dominant product within the open-ended segment and most of them lie outside an ISA or PEP wrapper 2
Despite holding a low proportion of the collective investment market, investment trusts have also seen strong growth in the last 5 years 3
Fundamental regulatory change in the shape of the UCITS Directive is aiming to realize the ``European passport`` idea for collective investments 3
However, UCITS seems to be missing its most basic objectives 3
Table of Contents 4
Table of figures 5
Table of tables 6
Collective investment overview 7
Datamonitor forecasts do not see big gains for mutual funds 7
Collective investments are only the 3rd largest product group 7
Collective investments have taken market share of other S&I products 7
The dominance of open-ended structures remains unchanged 8
Collective investments are forecast to lose market share 8
Fundamental regulatory change is taking place in the UK 10
The UCITS Directive is meant to realize the ``European passport`` idea for collective investments 10
UCITS has been unable to keep pace with a rapidly changing mutual funds market 10
So far, UCITS is missing its most basic objectives 11
The challenges for fund regulation continue 12
The limitations of UCITS led to the regulation of NURS in the UK 12
A preliminary assessment hints at critical adjustments to UCITS III 12
MiFID is causing considerable costs to the industry 13
Key objectives and measures centre around increased competition while protecting consumers 14
The implementation of MiFID is accompanied by major regulatory change in the UK 14
Under current cost estimates, MiFID would only benefit the industry after 10 years 15
The FSA may be easing restrictions on alternative investments for retail customers 15
The FSA's Retail Distribution Review could lead to substantial changes in distribution 16
The FSA has identified market failures in the distribution of retail investment products 16
Depolarisation as a shake-up in the intermediary sector... 16
... is causing confusion for consumers and advisors alike 16
The FSA's Retail Distribution Review proposes radical change to the financial advice sector 17
Industry expectations for indirect online fund distribution are high 18
Data 20
Unit trusts and OEICs 21
UK retail investors are not ready for more widespread fund holdings 21
Net inflows into retail funds have finally increased in 2006 21
Net inflows reveal how long the biggest chunk of the market, retail funds, suffers from a market downturn 21
OEICs are the dominating products in the open-ended segment 22
ISAs are not growing their share of the market 22
OEICs have become increasingly popular 23
Equity funds continue to be the preferred type of fund 25
Distribution has changed following the market downturn and depolarization 26
Intermediaries are now accounting for 81% of gross retail sales of unit trusts and OEICs 26
Almost 50% of the market is in the hands of just 10% of the players 27
Market concentration has increased since 2001 27
Only a small proportion of UK households has invested in unit trust or OEICs 29
5% of UK households invest in unit trusts 29
Men are more likely to invest in mutual funds than women 31
Data 33
investment trusts 38
Investment Trusts have seen strong growth over the last five years, primarily driven by the retail sector 38
However, they constitute a very minor segment of the overall UK retail savings & investments market 38
Property funds have experienced particularly high growth over the last 5 years, but it is global growth funds that remain the largest investment sector by total assets 39
And investor interest in property may see investment trusts switch from UK to EU property 39
JP Morgan heads the list of the top investment trust managers by assets under management 39
Investment trust companies celebrate VAT ruling 41
Data 42
APPENDIX 46
Definitions 46
Independent Financial Advisors (IFAs) 46
Gross Retail Sales 46
Net Sales 46
Share repurchases 46
Deposits 46
Investment trusts 46
ISA 47
OEICs 47
Unit trusts 47
Personal Equity Plan 48
UCITS - Undertakings for Collective Investment in Transferable Securities 48
Non-UCITS Retail Scheme 48
MiFID - Markets in Financial Instruments Directive 48
Further reading 49
Ask the analyst 49
Datamonitor consulting 49
Disclaimer 49
List of Tables
Table 1: Total value of UK retail savings & investments market by broad product line, GBPbn, 2002-2006 20
Table 2: Total forecast value of UK retail savings & investments market by broad product line, GBPbn, 2006-2011 20
Table 3: Total unit trust/OEIC funds under management segmented by investor, GBPbn, 2002-2006 33
Table 4: Breakdown of UK retail sales, segmented into repurchases and net inflows, GBPbn, 2002-2006 33
Table 5: Unit trust & OEIC funds under management by type, GBPbn, 2002-2006 33
Table 6: TypeTableTitleHere 34
Table 7: Total number of open-ended funds, of which OEICs, GBPbn, 2002-2006 34
Table 8: Gross retail sales of unit trusts and OEICs in the UK by distribution channel, %, 2002-2006 34
Table 9: Top 30 managers by total assets under management, including OEICs, PEPs & ISAs, %, 2001 & 2005 35
Table 10: Proportion of households in each weekly income bracket with unit trusts, %, 2002-2006 36
Table 11: Proportion of households throughout the UK with unit trusts, segmented by region, %, 2002-2006 36
Table 12: Proportion of males and females in each age band with unit trusts, %, 2005 36
Table 13: Total investment trusts under management, segmented by investor, GBPbn, 2002-2006 42
Table 14: Total value of UK retail savings & investments market by broad product line 42
Table 15: Top 6 conventional investment trust sectors by total assets, 2002-2006, GBPm 43
Table 16: Top investment trust providers by funds under management and market share, 2002-2006 43
Table 17: Top 30 investment trust providers by assets under management, 2002-2006, GBPm 44
Table 18: Market share of top 30 investment trust companies by assets under management 45
List of Figures
Figure 1: Mutual funds assets are still dwarfed by the huge amount of deposits, 2002-6 7
Figure 2: Investment trusts have remained a niche, 2006 8
Figure 3: Mutual funds will grow slower than other S&I products, 2006-2011f 9
Figure 4: Datamonitor forecasts assets held in collective investments to amount to GBP438bn in 2011 10
Figure 5: Retail unit trusts and OEICS totaled GBP365bn in 2006 21
Figure 6: Retail net inflows have only truly picked up again in 2006, 2002-6 22
Figure 7: ISA funds have not grown their share of unit-trust/OEIC funds under management, 2002-6 23
Figure 8: OEICs are now holding 62% of funds under management within open-ended structures, 2002-6 24
Figure 9: OEICs now represent 64% of open-ended funds, 2002-6 25
Figure 10: Equity funds continue to dominate 75% of the market, 2006 26
Figure 11: Intermediaries have strengthened their position as key distribution channel, 2002-6 27
Figure 12: Market concentration for the Top 10 fund managers has increased by 4 percentage points, 2002-5 28
Figure 13: Fidelity continues ahead of the competition, 2005 29
Figure 14: There is a clear positive link between fund investment and household income, 2002-6 30
Figure 15: Fund investment is more frequent in wealthier parts of the UK, 2002-6 31
Figure 16: More men invest in mutual funds than women, 2005/6 32
Figure 17: The retail sector is catching up with the institutional side, 2002-6 38
Figure 18: JP Morgan and F&C both have the largest investment trust market share 40