The UK remains a strong destination for Asset Management

UK’s Global Investment Futures campaign launches in the US

Earlier this year the Global Investment Futures campaign, a partnership between the City of London Corporation, His Majesty’s (HM) Government (specifically the United Kingdom’s Department for International Trade, DIT), and The Investment Association, launched in the United Kingdom; bringing together key industry stakeholders and government to showcase a strong offer for global investors, and the core message that the United Kingdom is open for business.

This promotional campaign aims to attract international capital and highlight the strengths of the United Kingdom as the second largest investment management centre outside of the US, which include access to global talent, expertise of UK investment managers, investment opportunities, and a thriving ecosystem of professional services – a compelling proposition for international investors looking to expand their footprint.

While this combination of factors underlies the UK’s position as a leading destination for asset managers, chief among them is UK’s strong and enduring links to the US. The US is by far the largest export market in financial services. As the world’s largest economy, the US houses vast amounts of capital ready for investment, and as of 2020, US pension funds held assets worth over $35.49 trillion. North America is the largest overseas market for UK investment managers after Europe, accounting for 20% of the assets managed for overseas clients (pdf). The campaign seeks to highlight the strong links and the offerings which make the UK an attractive destination for firms looking to expand internationally.

The UK remains the second largest investment management centre outside of the US: £11tn of assets are managed out of the UK accounting for 15% of the global assets under management (AUM).  The size of the UK asset management industry offers economies of scale with highly sophisticated enabling industries and consultancies in place to support some of the world’s largest institutional investors, including pension funds, sovereign wealth funds and insurance companies, and many overseas investors already operate offices in the UK.

The UK is an innovative, diverse, and globally connected centre, with the advantage of location: more than 99% of the world’s business activity takes place in time zones that overlap with the UK’s working day, making the UK a strong location for transatlantic trade and investment. Access to a diverse & skilled workforce, support for innovation, and the ease of doing business are also part of the UK’s strong offer to overseas investors.

The UK has a highly engaged government, with various government agencies such as DIT, His Majesty’s Treasury, and other departments, working together with industry to promote the UK as an attractive destination for doing business. The Global Investment Futures campaign aims to highlight the strength of expertise of the UK investment management industry, investment opportunities as well as the support available to make investing in the UK as seamless as possible.

In July 2022, the UK launched the Global Investment Futures campaign at the New York Stock Exchange (NYSE). Speaking at the campaign launch event, sponsored by Wheelhouse Advisors, the Lord Mayor of London was joined by Chris Cummings, CEO of The Investment Association; Emma Wade-Smith OBE, His Majesty’s Trade Commissioner (HMTC) for North America, Nikhil Rathi, CEO of the Financial Conduct Authority, and numerous corporate and finance leaders to discuss a range of topics from global macroeconomic trends, to post-Brexit financial regulation, and the UK’s leadership on Environmental, Social, Governance (ESG). 

“Every major financial centre is under pressure, due to a combination of inflation, and Covid-induced work from home policies” said John D’Agostino, Chair of DIT’s US Asset Management Working Group. “I think having a conference like this and directly hitting those issues in a very straightforward manner, is very, very encouraging.” 

UK Attractiveness for US Asset Management Industry

When it comes to investing in the UK, there is not only a strong argument due to the shared language, culture, and ease of business, but also the fact that the UK’s provides access to global investment opportunities. The UK is a pre-eminent asset management centre with a strong track record in attracting global investors – 44% of its total assets managed are from overseas investors. The UK is also a hub for managing international investment. For example, around 75% of the equities managed in the UK are international equities, and over half of the fixed income assets are invested in non-UK and non-sterling bonds.

The UK’s asset management industry continues to grow and remains an attractive access point to Europe and beyond. The UK is home to 1,100 asset management firms from 37 countries, the most in all of Europe. This figure is just under double its closest competitor - France, which houses 680 asset management firms, and Ireland, which sits at 417. According to the Investment Association, assets under management in the UK were up by £2.9 trillion (36%) between 2016 and 2020, with direct employment of the industry up by 10%.

ESG and Sustainable Finance

The UK asset management industry also has a competitive offer in the growing areas of Environmental, Social and Corporate Governance (ESG) and sustainable finance, offering alternative investment solutions and workforce diversity that can help to fill gaps for US investors. Ranked 1st in the ninth edition of the Global Green Finance Index (GGFI), the UK offers world-class talent, products, services, and policy support for sustainable finance.

Last year, nearly 300 green, ethical and alternative energy funds were launched in the UK, the highest among all major financial centres. Between 2020-2021, UK asset managers doubled down, nearly tripling the value of Socially Responsible Investing (SRI funds) under management. At COP26, the UK announced a plan to make the country the world’s first net-zero aligned financial centre. It is the first country to embed Net Zero carbon emission targets in its legislature and the first to make climate change financial disclosures mandatory across the economy, cementing the UK as a leader in the green finance industry.

Panellists at the campaign launch predicted this topic will remain a top priority for investors, thus sharpening the value of the UK’s offer.

“There is a lot happening in the UK, the EU, and the US, particularly in the areas of green taxonomies, ESG, sustainability, and focused investing” commented Joe Keefe, President of Impax Asset Management LLC. “It's a real watershed moment in the industry and the fact that the regulators are coming together and the fact that we're talking about UK’s role in that it houses two of the largest investment management hubs in Europe - London and Edinburgh, I think is timely.”

Alternative investment

Many US asset owners or managers are turning to the UK for more diversified investment strategies, especially for pension funds – a key group of US institutional investors – where they can take advantage of the UK’s strong alternative investment offer in private equity, infrastructure, and real estate to drive returns and diversify their portfolios.

Indeed, the UK has strong private equity capabilities to serve global asset owners and asset managers. It is the world’s second largest private equity (PE) and venture capital (VC) hub and largest in Europe, attracting £38bn in PE and VC funding in 202. The UK’s private equity and venture capital sector actively invests in the UK and the world. In 2020, UK PE and VC invested £25bn in 1,672 companies worldwide, of which close to two-third of the capital was invested outside the UK.

Tech investment has also been a strong focus of US investors and the UK tech sector has long been a destination for investment flows from the US. In the past five years, the tech industry accounted for over half of the investment flows from US asset managers and institutional investors. Recently M12, Microsoft’s venture capital fund, and Catalio Capital Management, an investment firm focusing on breakthrough biomedical technology, is just one of a number of US firms to set up offices in the UK. UK tech continues to outperform its European neighbours. Hitting a record high of $15bn in 2020, it raised more venture capital investment than Germany and France combined.

Summing up the opportunity of greater UK-US collaboration and investment, Matthew Crisp, CEO of Wheelhouse Advisors, said: “The future of UK investment is a bright and exciting one. For wholesale asset managers including hedge funds and private equity, the post-Brexit world largely operates on a ’business as usual’ model, and the UK continues to offer lots of opportunity for asset manager operating in or expanding to the UK, investing in or marketing funds to the UK and Europe, and increasingly as a fund domicile. Today's discussion has served to demonstrate both the high level of interest from the US asset manager community and that the UK remains as open for business as ever.”

“As the world's top two leaders in asset management, it is vital the US and the UK keep our business relationship strong,” said Vincent Keaveny, the Lord Mayor of the City of London. “We believe that the UK is the best gateway to Europe and beyond.”

Whether you are looking for investment opportunities, or you are looking to expand your overseas footprint, the UK has an extremely compelling proposition, and we welcome you. 

If you would like to be kept up to date with the Global Investment Futures campaign activities, please get in touch.