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Investment managers are more optimistic
30 June 2014
The latest CBI/PwC Financial Services Survey finds that new products and services are increasingly important to growth in the industry
Investment managers are increasingly confident on the back
of rising business volumes and fee incomes, according to the
new CBI/PwC Financial Services Survey.
Managers surveyed said their sentiment about the overall
business situation had risen in spite of flat profitability
following two quarters of strong growth.
Although sentiment rose for the 10th consecutive quarter, it
was the weakest pace seen since December 2011.
"Investment managers are upbeat about their prospects after a
steady performance during the last quarter. Growth in business
volumes and fee income is expected to continue over the coming
months. Growing risk appetite is expected to boost activity
with both retail and wholesale investors," said Paula Smith,
PwC’s UK asset management leader.
Business volumes increased for a third quarter in the three
months to June at a pace that was the strongest since March
2013. This growth was mostly attributed to rising demand from
industrial & commercial companies, financial institutions
and particularly from overseas customers, although business
with private individuals was flat. Total business volumes are
expected to expand at a similarly robust pace in the coming
three months, said PwC and CBI.
Employment increased at an above-average pace for a seventh
consecutive quarter and is expected to rise at an even faster
pace in the coming three months.
Although profitability was flat during the quarter, the
survey found that strong increases in business volumes are
expected to outweigh higher costs in the next quarter.
Income from fees, commissions and premiums rose for a third
consecutive quarter, albeit at a slower pace than the
"exceptionally high" pace in the previous quarter. As expected,
income from net interest, investment and trading fell for a
second quarter. Respondents expected revenue from both sources
to grow in the next quarter.
Despite increasing optimism, the survey found that level of
demand would continue to be an above-average barrier to
expansion of business over the next year. Respondents said that
competition, legislation and regulation were also the principal
constraints on business expansion over the next 12 months, with
spending on regulatory compliance also expected to increase,
even if somewhat less strongly than before.
In light of this, investment managers said that new products
and services were increasingly important in their growth
"This reflects increasing investor demand for low-fee
products such as exchange traded funds," said Smith.
"Investment in new post-retirement products could also grow
over the coming quarters."
She added that interest in international expansion as a source
of growth continued to rise, which was matched by "increasing
interest in M&A and a continuing focus on strategic
"The importance of recognised brands when entering new markets
is only likely to grow. Investment managers will be hoping that
inflows to European equities continue."