We recently published a new edition of our report on fund management.
This report is an important part of our suite of economic research since the fund management sector sits at the heart of so much financial and related professional services activity—pension provision, insurance coverage and wealth management, to cite just a few examples. But this research also presents a particular challenge—and therefore area of interest!—because of the scarcity of comprehensive data on the sector globally.
Using data from a number of national and industry sources, we estimate that the global fund management industry had assets of around $160trn in 2016, 63% of which were in conventional funds—pension funds, mutual funds and insurance funds. Of these, mutual funds accounted for the largest share, with $40.6trn in assets under management at the end of 2016.
The fund management sector is somewhat unique in being highly geographically concentrated: the US is the source of around half the global total of mutual funds under management, and has pension assets equivalent to around 60% of the global total, according to our estimates. This position is essentially a function of the large size of the US domestic market—the current population is almost 330m, making it the world’s third-most-populous country and the largest developed market by a very wide margin. The next most populous G7 economy is Japan, with around 130m people, and it is no coincidence that Japan is the world’s second-largest investment-management centre.
In this context, it is clear that the UK’s position as the world’s third-largest investment-management centre is due to the strong international orientation of its fund management sector. Management of funds for overseas clients is an essential feature of the UK’s status as a global centre since it gives it a scale and scope beyond what the purely domestic market, with a population of around 65m, could support. Of the overseas funds managed in the UK, roughly half come from EEA countries, with the rest coming predominantly from the US and Asia. It is this dynamic that underlies the very high level of funds under management in proportion to the size of the economy.