PENSION FUNDS MOVE £40 BILLION FROM
EQUITIES TO BONDS IN 12 MONTHS
 
IMA Asset Management Survey 2004

IMA today released the results of its 2004 Annual Asset Management Survey. Now in its third year, the survey covers 133 IMA members who between them manage £7.87 trillion globally and £2.16 trillion in the UK.

The data, collected as at June 2004, highlights a number of significant industry trends. Of particular note, the survey bears out the findings of the 2004 report which found that managers of pension funds were moving away from equities and into bonds. Matched samples for pension fund asset allocations from 2003 and 2004 indicate a fall in the proportion of equities from 60% to 56% - and a rise in bonds from 36% to 38%. Taking into account changes in asset values, IMA estimates that this represents a move of some £40 billion into bonds. This is completely consistent with IMA’s estimate last year predicting a move of £150 billion over a 3-5 year period.

The survey also questioned members about the use of soft commissions. The survey found that the use of “softing” had continued to fall in 2004. Using a matched sample, weighted by assets under management, 3.8% of business was subject to soft commissions compared to 4.5% last year. 23 groups out of 41 indicated that they did not use soft commissions and of those who did only 9 did so for more than 10% of commissions paid.

• Other key findings from the survey include:
  Assets managed in the UK by IMA member firms amount to £2.16 trillion, up from £1.99 trillion the previous year
• Assets managed globally by IMA members directly – or as part of their parent groups – reached £7.87 trillion up from £6.97 trillion in 2004
• Industry concentration remains unchanged with the market share of the five largest groups accounting for 28%
• The overall asset split between equities and bonds is broadly unchanged.  Given rising equity values and bond yields, this suggests an underlying erosion of the position of equities of some 5 per cent
• Average operating profitability of IMA members is 23%, up from 21% in 2003 However, median profitability is 17% and 70% of respondents do not meet average profitability
• Seven respondents, managing about £507 billion (one third of the sample), direct 100% of their business through brokers on an execution only basis
• While ‘customised benchmarks’ continue to dominate mandates, matched samples from 2003 and 2004 indicate that more assets were being managed using Peer Group and Passive mandates.

Richard Saunders, Chief Executive of the IMA commented:

“2004 sees a growth in assets managed by IMA members with UK assets up by 9%. The continuation of trends in asset management, particularly the move towards bonds, reflects the changing demands on asset managers by their clients.

“The most striking finding is the shift in asset holdings by pension funds now under way, which we estimate to have been £40 billion over 12 months out of equities and into fixed interest.  We believe this process will continue for some time yet, representing a fundamental reallocation of pension fund assets.”

-Ends-

A copy of the survey is attached here.

For further information, please contact:
Helen Stephenson, Communications Officer, IMA, 020 7831 0898

Out of hours contact:
Mona Patel, Head of Communications, IMA, 07834 089332