For immediate release: Monday 23rd May 2005

ASSET MANAGEMENT – WHY THE UK?

• The UK’s position as a leading centre for asset management is secure in the short-term
• Current principles-based UK regulation is regarded favourably but there remain concerns about the direction in which it is being pulled and the pace of change
• Fragmentation and specialisation within the industry is likely to continue
• Other countries are challenging the UK’s position through the introduction of favourable regulatory and tax regimes

The UK as a centre for asset management remains secure in the short-term due to the performance and liquidity of the UK’s capital markets, the quality of its financial infrastructure and the size of its qualified labour pool, but it faces excessive regulatory change and the growth of other centres pro-actively challenging the UK’s pre-eminence.

The report, The Future of UK Asset Management: Competitive Position and Location Choice, published jointly by the Corporation of London and the Investment Management Association and written by Oxera, shows that while UK regulation is seen as more independent than many European regimes it can also be perceived as bureaucratic and overly rigid in the implementation of EU Directives.

The very strength of the UK as the location of choice is based on a series of relationships forming a critical mass that is the UK global financial services industry.  Asset management is part of that.  However, it is not a single function: it operates through a value chain covering a range of functions.  This is in the process of fragmenting and, as the report shows, this process looks set to continue.

The report also reveals that other potential asset management centres are creating favourable regulatory, tax and legal environments in trying to build up critical mass of their own.  This can already be seen in the marketplace and longer term is a credible threat to London’s future.

Michael Snyder, Chairman, Policy and Resources Committee, Corporation of London, said,

“This is an important piece of research which shows that London has much to recommend it as the location of choice for asset management.  However, there are longer-term concerns that policy-makers might want to address now.  It is clear that regulatory factors will increasingly influence future location decisions and attention needs to be turned to what measures can be taken to protect the competitive advantages of this major UK industry.”

Lindsay Tomlinson, Chairman, Investment Management Association, said,

“While the overall message of the report is positive we cannot afford to be complacent.  The fact that nearly a quarter of respondents said that regulation or tax already pose the greatest disadvantages to doing business in the UK suggests that this has the potential to become a crucial issue in the longer-term.”

Dr Luis Correia da Silva, Director, Oxera, said,

“There are three main parts of the asset management value chain. The factors affecting their location differ appreciably, and the performance of the UK in relation to these also varies. Our research shows that regulation poses no immediate threat, although the industry views regulation to be a major driver in the location of core asset management and marketing and distribution. The middle and back office is the area most likely to see some movement out of the UK, as asset management companies seek to take advantage of lower-cost locations. The one area where regulation (and taxation) has already had an impact is in the decision to domicile collective investments offshore."

A copy of the report The Future of UK Asset Management: Competitive Position and Location Choice can be found here.

- ENDS -

For further information, please contact:

Fiona Milligan, Senior Press Officer, Corporation of London, 020 7332 3451
Helen Stephenson, Communications Officer, IMA, 020 7831 0898
Mona Patel, Head of Communications, IMA (m) 07834 089332
Karen Lewis, Oxera, 01865 253010, (m) 07929 593254

Notes to Editors:

1. The research is based on a survey of 31 asset management firms, covering the majority of assets managed in the UK, and 27 in-depth interviews with asset managers, outsourcing service providers and experts on fund regulation and tax.