2016年-FCA英国金融行为监管局_ms15_2_2_interim_report_208页_3mb

Asset Management Market Study Interim Report Summary

Core Content

The Asset Management Market Study Interim Report (MS15/2.2) is a comprehensive analysis of the UK asset management sector, focusing on competition, value for money, and investor outcomes. Published in November 2016, the report is part of a broader market investigation into investment consultancy services (MIR MS15/2.2a). It aims to understand how asset managers compete, the impact of intermediaries, and the role of governance bodies in ensuring fair pricing and quality of services. The FCA also considers the implications of regulatory frameworks and international comparisons to shape its policy recommendations.

Main Findings

1. Market Overview

• The UK asset management sector is the second-largest globally, managing £6.9 trillion in assets.
  • £1 trillion for retail investors.
  • £3 trillion for pension funds and other institutional investors.
  • £2.7 trillion for overseas clients.
• Asset managers play a key role in financial well-being, economic growth, and corporate governance.

2. Investor Choices and Value for Money

• Investors consider return, risk, price, and quality of services when choosing asset managers.
• Value for money is generally viewed as risk-adjusted net returns.
• Retail investors are often not aware of fund charges, while institutional investors are increasingly focused on cost transparency.

3. Price Trends and Competitive Pressures

• Active funds have seen little change in charges over the past decade.
• Passive funds have experienced declining charges over the last five years, reflecting increased price awareness among certain investor groups.
• Price clustering is observed in active equity funds, with many priced at 1% or 0.75%, regardless of fund size.
• Cost control is weak in areas where monitoring is complex, such as trading execution and foreign exchange transactions.

4. Investor Outcomes

• Actively managed funds do not consistently outperform their benchmarks after costs.
• Passive funds typically provide better returns than active funds after costs, especially for retail investors.
• Absolute return funds often fail to report performance against targets and may charge performance fees even when underperforming, misleading investors.

5. Investor Switching

• Switching costs include explicit charges, tax implications, and time and effort.
• Investors may be reluctant to switch due to loss crystallisation or recommended holding periods.
• Persistent underperformance is more common than expected in a competitive market.
  • 35% of equity funds that underperformed 2005–2010 closed or merged 2011–2015.
  • This may distort investor perceptions and reduce competition.

6. Role of Investment Consultants

• Investment consultants play a key role in advising institutional investors.
• They may influence competition and pricing dynamics.
• Conflicts of interest are a concern, as consultants may have financial incentives that could affect their objectivity.

7. Barriers to Innovation

• The sector has seen innovation, particularly in passive investing.
• Barriers to entry, expansion, and innovation exist, potentially due to market structure and behavior along the value chain.
• Technological advances may be inhibited by existing practices and regulatory constraints.

8. Profitability and Cost Structures

• Asset management firms have substantial profit margins, averaging 36% over a six-year period.
• Active funds tend to have higher charges and profits compared to passive funds.
• Costs are often not passed on to investors, suggesting economies of scale are retained by the firms.

Key Issues and Questions for Discussion

• Weak price competition in the asset management market affects investor returns.
• Transparency of transaction costs and investment objectives is lacking, especially for retail investors.
• Investor awareness of fund charges is low, raising concerns about informed decision-making.
• Switching behavior is hindered by costs and complexity, limiting market efficiency.
• Investment consultants may influence competition and pricing, but their objectivity is questioned.
• Barriers to innovation exist, which could hinder the sector’s growth and development.

Proposed Remedies and Next Steps

• The FCA is considering remedies to improve competition, value for money, and transparency.
• Next steps include:
  • Further analysis of fund closures and mergers.
  • Engaging stakeholders for feedback on the findings and proposed remedies.
  • Continuing to monitor and review the UK and EU regulatory framework.
• The report also references other FCA work, including:
  • Transaction cost disclosure in workplace pensions.
  • Investment Management Agreement and segregated mandates.
  • PRIPs regulation and cost unbundling.

Conclusion

The FCA aims to ensure that the asset management market operates effectively and that investors receive value for money. The interim report highlights key challenges such as weak price competition, lack of transparency, and barriers to innovation, and outlines questions for discussion to guide future policy decisions. The report is a key part of a broader policy package that includes regulatory developments and stakeholder engagement.

Key Information

• Total assets under management (AUM): £6.9 trillion
• Passive funds: ~23% of AUM, with lower charges and better returns for investors
• Active funds: Higher charges and profits, but no consistent outperformance
• Investor awareness: Only half of retail investors are aware of fund charges
• Switching costs: Include explicit charges, tax, and time and effort
• Tracking error: A measure of fund performance deviation from the benchmark
• FCA consultation deadline: 20 February 2017
• Stakeholder contact: Becky Young, Competition Division, Financial Conduct Authority

Appendices and Supporting Materials

• Annexes include:

  • Stakeholder views on the Terms of Reference
  • Regulatory developments
  • Consumer research
  • Econometric analysis (retail and institutional)
  • Fund charges and profitability analysis
  • International comparisons

• Also published:

  • MIR MS15/2.2a – Provisional decision to investigate investment consultancy services
  • Appendix 1 – Consumer Survey Technical Report
  • Tilba, Baddeley & Liao (2016) – Research on oversight committees

Regulatory Context

• The FCA is working within the UK and EU regulatory framework.
• It is monitoring changes in the UK regulatory framework post-Brexit.
• Confidentiality of responses is subject to disclosure under the Freedom of Information Act 2000.