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FCA launches competition study of UK asset management industry

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The Financial Conduct Authority (FCA) has set out the terms for reference for its market study into competition in the UK asset management industry.  

The study was first signalled in March this year when the FCA published its 2015-16 business plan.

The study, to include both retail and institutional investors, will assess how asset managers compete to deliver value; whether asset managers are motivated and able to control costs along the value chain; and what effect investment consultants have on competition for institutional asset management.

In addition, the FCA will look at whether there are any barriers to innovation and/or technological advances in asset management.

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It will soon be approaching market participants for information and data to look into the above areas, in addition to hosting roundtables and meetings.

The FCA is launching the study because it wants to ensure competition is working properly in what is such a vital sector to the UK economy.

The wholesale sector competition review, which it carried out last year, flagged up a number of areas where competition was not working effectively.

The UK’s £6.6trn (€9.4trn) asset management market – the largest in Europe – covers around £2.1trn of pension fund investments, and £1trn each of insurance products and non-mainstream asset management products, both of which include pension fund investments.

A further £400bn is invested by charities and the public sector.

The FCA believes that, given the size of the market and the long-term nature of investments, even a small improvement in the effectiveness of competition could be of substantial benefit for investors.

Christopher Woolard, director of strategy and competition at the FCA, said: “Asset managers provide an important economic function, bringing together those with money to invest and companies and governments that need capital. Given the significant role they play in the economy, it is essential that competition work effectively for these services.”

He added: “Our market study aims to ensure both retail and institutional investors can get value for money when purchasing these services – which we expect to further strengthen the UK’s position as a major centre for asset management.”

The study will be carried out over the next year.

Interim findings are expected to be published in summer 2016 and will indicate any areas of concern, with an explanation of what they are and how the FCA proposes to address them.

The FCA will also set out any areas where few or no problems have been found.

The final report should be published by early 2017.

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