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Number of LDI managers in UK declines by third since 2007, finds KPMG

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  • Number of LDI managers in UK declines by third since 2007, finds KPMG

UK - The number of fund managers offering liability-driven investment (LDI) options has noticeably decreased since 2007, with the number falling by 35% to just 15 in the space of three years, according to KPMG.

As part of its 2011 LDI Survey, the firm examined market trends, noting an "oligopoly", whereby the three largest fund managers managed the majority of assets.

Simeon Willis, principal consultant at KPMG's investment advisory group, said that, by the end of 2010, there had been "substantial consolidation" in the market.

In 2007, 23 investment managers offered LDI management - now reduced to 15 - while assets under management rose to an all-time high of £243bn last year.

"There is now something of an oligopoly operating, under which just three fund managers are looking after the lion's share of assets in both the pooled and segregated categories," Willis said, referencing the dominance of BlackRock, Insight Investment and Legal & General.

He argued that while these companies' dominance did not yet pose a threat to competition, if the number of asset managers offering such services continued to fall, it could become an issue.

The survey found that mandate numbers had only risen by 7% over the past two years, meaning an almost 14% increase in assets was likely the result of increasing mandate size.

It further found that hedging strategies had become increasingly popular since 2008, with a 25% increase in such tools since the economic crisis.

Tom Brown, European head of investment management at KPMG, said: "Investment managers are responding to growing client demands by offering increasingly flexible and tailored solutions given the market place is so competitive, and there are currently a number of clear leaders in the market."

Brown added that, as increasing numbers of pension schemes attempted to de-risk using LDI strategies, mandates would begin to spread more evenly over the other providers, including Schroders, P-Solve and Axa Investment Managers.

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