Crisis? What crisis? Global funds grow stronger

November 13, 2012

Global funds are having a good year.

According to a report by financial services lobby TheCityUK, pension funds,  insurance funds and  mutual funds are on track to finish the year with $21 trillion more of assets under management than when they hit rock bottom in 2008 with the Lehmann collapse.

They are growing for the fourth year in a row, and much more so than last year, thanks to the recovery in equity markets.

All together, the London lobby forecasts these funds will end the year with about $85.2 trillion of assets under managements globally, $5.4 trillion more than last year, while 2011 ended “only” $1 trillion higher than 2010.

 The 1.2% increase in assets under management in 2011 represents a slowdown from the strong rate of growth seen in the two previous years, and was largely due to the decline in equity markets in the latter part of the year and sovereign debt crisis in Europe.

The recovery in equity markets since then has contributed to the increase in assets under management in
2012 … On the whole, the fund management industry has recovered quickly from the sharp fall in assets under management at the outset of the credit crisis, with most of the recovery coming from market performance rather than new inflows.

The United States accounted for nearly a half of conventional assets under management or some $36 trillion, followed by Britain with around 8% of the global total, Japan and France, the report said.

When adding sovereign wealth funds, hedge funds, private equity, exchange traded funds and funds of wealthy individuals, assets of the global fund management industry amount to around $120 trillion, the study said.

In Britain, where the investment industry prepares for a shake-up of regulation, these were also record years.

The UK fund management industry was responsible for a record £5.1 trillion of funds at the end of 2011. This was up 5% during the year and follows double digit growth in the two previous years, 17% and 13% respectively. These figures represent a conservative estimate.

TheCityUK estimates that UK funds under management increased by a further 4% in the first three quarters of 2012 with the full year increase likely to reach around 5%.

It said however that many things could change next year with new regulations, at home and abroad.

Regulatory changes resulting from the economic downturn are likely to influence the fund management industry in the coming years. In Europe, the Alternative Investment Fund Managers Directive (AIFMD) that came into force in July 2011 will bring a number of changes for hedge funds and  private equity firms including new disclosure requirements, harmonised governance standards and limits on leverage.

In the UK the Financial Services Authority’s Retail Distribution Review, due to be implemented at end-2012, aims to establish a more transparent and consumer-friendly retail investment market in the coming years.

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