In our 2019/20 Business Plan, we made a commitment to provide a range of metrics to assess the impact of actions put in place since our Asset Management Market Study[1] in 2016.
Asset manager profitability
In 2019, we surveyed 38 of the largest UK asset managers representing 74% of UK assets under management (AUM) and saw an AUM-weighted average operating profit margin of 36%, down slightly from 37% in 2015, based on a survey of 36 firms representing 71% of UK AUM.
There is a slight discrepancy between the figure of 37% in 2015 quoted here and the figure of 38% quoted in the Annual Report and Accounts 2019/20. 37% is the correct figure.
Ongoing fees for active funds
Our analysis shows that overall, AUM-weighted average ongoing fees for UK-domiciled active funds have declined from 1.07% of AUM per year in 2015, to reach 0.93% in 2018 and then 0.80% in 2019 (data sourced from Morningstar).
Ongoing fees for passive funds
Our analysis showed that overall, AUM-weighted average ongoing fees for UK-domiciled passive funds have declined from 0.25% of AUM per year in 2015, to reach 0.14% in 2018 and then 0.11% in 2019 (data sourced from Morningstar).
Performance after fees of UK-domiciled passive funds
In the 12 months to April 2020, 85.3% of AUM UK-domiciled passive funds tracked their benchmarks to within 50 basis points, up from 73.9% in the 12 months to April 2015, a significant improvement in tracking performance. This was helped by a fall in the number of poor quality tracker funds (100 basis points or more deviation from benchmarks) from 5.7% of AUM in 2017, to 0.8% in 2020 (data sourced from Morningstar).
In summary, the above metrics show a modest decline in profitability in the sector, driven by a very significant downward trend in fees in most asset classes over the past 4 years, especially since 2018. This suggests that our remedies may be leading to improvements in competition in the sector.
We also committed to publishing data on long-term underperforming active funds, after fees. We are still working on this data and hope to share it in 2021.