UK – Fund managers will need to take collaborative action to address what have now become industry-wide issues facing the UK’s investment management industry, says the latest PricewaterhouseCoopers (PWC) UK investment management survey.

The survey is made up of information sourced from 23 major investment houses with combined assets under management of over £1,100bn (€1,784bn).

Factors such as prices and overall markets falling could lead to margins being halved to around 15% this year, the report warns, despite world equity markets actually being 12% higher overall in 2000 than in 1999. Revenue generation has fallen from 22.5% to 22.1% and average profitability is also slightly down at 28.1%.

Says Graham Wright, a partner at PWC : “For the first time in years fund managers are facing a double whammy of markets and prices in simultaneous decline. This takes us in to a new era where profits will be much more difficult to maintain.” He suggests that one in five management companies in the UK will report a loss this year if current trends continue.

The survey also highlights the importance of economies of scale, the scale having been increased in recent years through mergers and acquisitions, which are aimed at achieving low costs and enhancing efficiency. This is an area where companies with institutional business of more than £50bn in assets under management and specialist products do best, since very few have retail business large enough to generate cost economies of scale.

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