Chris Cummings, CEO of the Investment Association (IA), has urged the UK government to provide greater "predictability" to asset managers in efforts to maintain the sector's growing allocation to the country's infrastructure and contribution to the economy.
According to the IA's 2017-2018 edition of its Asset Management in
the UK report, which surveyed fund firms to identify industry trends, asset managers increased their allocation to UK infrastructure to £40bn in 2017 from £29bn a year earlier.
The survey attributed this rise to growing demand for infrastructure from pension schemes and insurance companies, looking for "diverse sources of return, and returns that match the amounts they need to pay out".
Speaking to Investment Week, Cummings said: "What we need from government is predictability of the business environment - to make sure there are no policy or tax changes that would undermine the attractiveness of the UK as a place to invest in infrastructure.
"There is some great innovation coming through, but it needs to be set against a framework where infrastructure investment continues to be attractive to investors and asset managers looking for a good, long-term return."
Approximately three-quarters of asset managers' investment in infrastructure is financing traditional economic projects related to energy, transport and the environment, the report said.
In addition, the remaining 25% is invested in projects that provide a social benefit, such as social housing, which Cummings said is essential in ensuring the asset management industry is viewed by government as an important component in its policymaking.
He explained: "These are really interesting investments because they demonstrate to policymakers that this is an industry that is able to help finance the UK as well as provide investors with good, long-term earnings."
Importance to the UK economy
The IA's latest survey also found a total of £1.7trn is now invested in the UK economy via the asset management industry, comprising £920bn of equity holdings that account for "around a third of the value of UK PLC", according to the trade body.
Meanwhile, a further £500bn was invested by the industry in sterling corporate bonds "showcasing the industry's primary role in corporate debt financing", the report said.
In addition, the report found the continued decline in bank lending since the financial crisis has opened up asset managers to funding businesses through private markets, with £31bn invested in direct lending in 2017.
The report said small businesses in particular are benefitting from this, due to growing interest from investors in the opportunities arising from lending to SMEs.
Cummings said: "Our industry is doing more than ever to play our part in powering British businesses. Bank lending is no longer as widely accessible, governments are limiting their borrowing and public listing is becoming less attractive for certain companies.
"In this changing landscape, new opportunities are emerging for asset managers."
Cummings added the change has led to asset managers being "recognised more clearly by government as having a part to
play in the development of the UK economy".
He said: "Asset management sits at the heart of the UK economy. It is helping millions of households save for the future while supporting businesses and economic growth in the UK and abroad."