IMA Survey Finds Growing Interest in Market-Based Finance and Long-Term Incentives

Figures from the U.K. Investment Management Association show assets under management at record levels in 2012, with IMA member firms managing £4.5 trillion. The eleventh annual Asset Management Survey includes survey responses from 72 members and 27 senior industry figures gathered through interviews.

The survey findings confirm a shift towards more outcome-focused products, placing the emphasis on meeting specific client needs and objectives. There is also an ongoing trend towards de-risking; for example, there is a marked long-term decline in the proportion of investment funds under management represented by equity funds.

The alignment of incentives in the U.K. equity markets in order to support long-term value creation was also discussed. Interviewees identified three categories in particular: “long-termist” behavior, emphasizing engagement in corporate governance; long-term finance provision, such as direct lending to business; and long-term financing projects, most typically through infrastructure or project finance.

The survey also found growing interest in the role of market-based finance. Jonathan Lipkin, IMA director of public policy, explains: “Asset managers believe that there will be more market-based finance in the future, and feel more positive and open to the idea of stepping in to fill some of the gaps created by bank and government deleveraging.

“However, a number of concerns were raised including the risk of subordinating clients’ interests to the perceived interests of the wider economy, for example, if the government wanted to drive investment towards specific infrastructure projects. Asset managers therefore voiced the need for commitment from the government and regulator to work together with the industry to ensure that client pools of capital can be connected to those who need capital investment in the most effective way possible.”