The Investment Association has released its latest report entitled “Investment Management in the UK”, showing a rise in assets under management, despite global market volatility, as well as a shift from pension to retail assets.

The UK investment management industry has recorded 10 per cent growth in assets under management (AuM). It reached a peak of £10 trillion ($13.6 trillion) in 2024 compared with £9.1 trillion in 2023, according to latest figures from the Investment Association (IA).

Despite the uncertain global market situation, the growth reflects strong market performance in 2024, which saw the industry bounce back to surpass 2021 levels and reverse 2022’s market-driven dip, the association said. The sector has been boosted by strong equity returns, better economic conditions and an increasing number of assets managed from the UK on behalf of overseas investors. UK funds under management (FuM) rose 5 per cent to £1.49 trillion, reflecting improved investor confidence and market returns.

Strong retail market growth
Assets managed on behalf of retail investors reached 28 per cent in 2024, making up a higher percentage of total AuM than pension funds (27 per cent) for the first time. Since 2020 and the Covid-19 pandemic, there has been sustained growth and interest in retail assets.

The association believes that industry will build on the momentum in this section of the market and enable more people to benefit from the long-term growth potential of investing. According to the Financial Conduct Authority (FCA), three in five UK adults with over £10,000 of investable assets hold at least three-quarters of these savings in cash. The IA is behind the recently-announced government-backed campaign to build awareness of the importance of investing to peoples’ future financial wellbeing and long-term resilience.

In tandem with the growth in retail assets, pension assets have fallen from a peak of 45 per cent of total AuM in 2018 to 27 per cent in 2024, the association said. This is driven by factors including increasing the numbers of Defined Benefit (DB) schemes winding down as the profile of members gets older and DB schemes reaching full funding and transferring their liabilities and assets to insurers. The impact of the 2022 gilt crisis has also been felt in the institutional market.

UK market strengthens         
2024’s performance bolstered the UK investment management industry’s position, with assets managed on behalf of overseas clients surpassing 50 per cent for the first time, making up £5.1 trillion of AuM, the association continued.

Overseas client assets have more than doubled over the past decade, growing at a faster rate than UK client assets, which increased roughly 40 per cent over the same period. There was a return to growth in European client assets in 2024; they now account for 59 per cent of overseas AuM, totalling £3.0 trillion – up by 20 per cent year on year.

In addition, UK investment management firms manage £990 billion of assets for North American investors and £740 billion on behalf of clients in Asia-Pacific. Assets managed for Latin-American clients were the fastest growing in 2024, increasing by 40 per cent to reach £70 billion.

Index strategies rise as ETF demand grows
Indexing strategies reached their highest level of 35 per cent of AuM in 2024, after a slight dip in 2023 due to market volatility and LDI assets temporarily denting growth. While active management still represents roughly two-thirds of assets, index trackers have grown by 24 per cent over the past decade, the association said.

The acceleration of indexing strategies in 2024 is likely to have been boosted by the expansion of the European exchange-traded fund (ETF) market, which saw AuM increase 33 per cent over the year to reach over €2.2 trillion ($2.6 trillion), according to data from Morningstar.

Of the £4.9 trillion of assets managed from the UK that sit in investment funds, almost three-quarters are in funds domiciled overseas. Most of 2024’s investment fund growth came via funds domiciled in Ireland, which now make up over half of overseas fund assets managed from the UK, the association continued. UK investment firms manage over £3 trillion of overseas-domiciled fund assets, showcasing how UK expertise continues to drive international portfolios.

“Significant improvements to the regulatory environment, enabling firms to introduce appropriate levels of risk and foster innovation, are helping UK firms to continue to thrive and take important steps towards creating a culture of inclusive investment in the UK,” Chris Cummings, CEO of the Investment Association, said. “Maintaining regulatory and political stability will be essential to sustaining competitiveness and attracting long-term capital.”

“The UK government’s recent efforts to boost domestic capital through the Leeds Reforms signal a powerful alignment between government, regulator, and industry. As retail assets continue to take a growing share of industry AuM, we look forward to building on this momentum to drive further growth and enable more people across the UK to benefit from the long-term growth potential of investing,” he added.

The report is based on responses to the association’s annual questionnaire, monthly fund data and interviews with the IA board and Advisory Council, with figures as of 31 December 2024. It received 62 questionnaire responses, representing 88 per cent of total assets under management. The full report will be available in September.

The IA supports British savers, investors and businesses, with its 250 members managing £10 trillion of assets. The UK is the second largest investment management centre in the world after the US, and manages £5.1 trillion in overseas client AuM.