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 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.