Total investments in the U.K. reached £1.4 trillion, across equities, bonds, infrastructure and property investment, but U.K. equity funds saw outflows of £12 billion in 2022, double the previous year.
Pension funds are still the largest client type at 63% of third-party assets, but are down from 69% in 2021. There were more retail investors, who now hold 24.7% of assets under management in the U.K. That reflects different asset exposure and market outcomes in 2022 and a greater interest in investing that was sparked during the COVD-19 pandemic. After years of little change, the retail share of assets under management in the survey increased to 20% in 2020 and 22% in 2021, now representing £2.2 trillion.
In 2022, turbulence in the gilt market put significant pressure on pension funds, and liability-driven investing strategies were down 28% from the previous year, the survey found. Responsible investment funds also saw slower growth, with inflows of £5.4 billion, compared to £15.9 billion in 2021.
Still, ESG investing will continue to be a key theme for the U.K. investment management industry, the survey found, along with accelerating technological advances and cultural shifts that stress diversity.
Global diversification in asset allocation was another 2022 theme, with 60% of fixed income assets held in overseas bonds compared with 55% in 2021 and 37% a decade ago. North American equities grew to 32% of U.K. equity holdings from 30% in 2021, while U.K. equities fell to 22%. Indexing strategies, spurred by the growth of exchange-traded funds, now account for a third of total AUM, up one percentage point from 2021 and 12 percentage points over the past decade, the survey found.
The U.K. investment management industry manages £4.6 trillion for U.K. retail and institutional investors and £4.2 for overseas investors, including £2.4 trillion in Europe, £845 billion in North America and £680 billion in Asia, the survey found.