CBI/PwC: Investment managers’ outlook optimistic

Investment managers expressed an optimistic outlook for the second quarter running, but concerns are growing over impending regulatory burdens, the latest CBI/PwC quarterly financial services survey shows

The survey, conducted between 18 August and 1 September, showed profitability increased for the fifth consecutive quarter, with the revenue stream increasing at a greater rate than the cost base, and a growth in business volumes.

The investment management sector shows “a bit more optimism than in other sectors,” said Pars Purewal, PwC’s UK asset management and securities trading head. Higher market levels had driven the positive outlook, with the FTSE staying over 5000.

Recruiting at asset managers increased – though in response to the perceived compliance burden. Purewal said the degree of regulation was seen as “enormous” and that asset managers had “to find people to cope with that”.

Asset managers are facing an onslaught of regulation. From Europe, there is the Alternative Investment Fund Managers Directive next month, the UCITS IV, the EU Solvency II Insurance Directive and the draft EU Capital Requirements Directive. In the US, asset managers will be impacted by the Dodd-Frank Wall Street Reform and Consumer Protection Act (whereby 2,500 firms will be made to register with the Securities and Exchange Commission). In the UK, the FSA is tightening its rules, particularly looking at remuneration within investment firms.

Securities trading expressed similar caution due to impending regulation. Uncertainty in the sector was driven by concerns over the volume of activity, as business volumes increased slightly, though short of what was anticipated. Securities traders are therefore taking a “cautious approach”.

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