Investments 'all-time high' due to closed-ended property boom: AIC

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The investment company sector’s total assets under management reached a new record high of £141bn at the end of June 2016, having almost doubled in a decade, according to data released today by the Association of Investment Companies.

Despite the uncertain first half of the year, brought about by the UK’s decision to leave the EU and the resultant plummeting pound and other issues affecting global markets, the Association of Investment Companies (AIC) said that almost £5bn in assets under management had increased on the figures released at the previous month end.

The £141bn total is an increase of almost £9bn since the end of January 2016 and  compares to £76bn assets under management a decade ago, at the end of June 2006.

Ian Sayers, chief executive at the AIC, said that the increased demand for closed-ended property investments, among other factors, has helped the rise to record levels in the sale of investment trusts and other related investment vehicles.

Open-ended property funds have been under-fire recently, as reported,  following the decision by many of the industry’s main players to restrict outflows affecting more than £13bn in investments following the clamour to exit such funds after the Brexit vote.

As a result more than half of the open-ended property sector is still under such restrictions with the FCA monitoring the situation, as reported, amid calls to make all property funds closed-ended investments.

‘Rise of alternative assets’

“Although it has been a challenging start to the year, it is reassuring to see industry total assets standing at an all-time high,” said Sayers.

“The rise of ‘alternative assets’, such as property and infrastructure illustrates not just the demand for yield, but also the suitability of the closed-ended structure when it comes to investing in illiquid assets.

“This structure, which allows managers to take a long-term view without having to deal with the problems of large scale redemptions, also means that the sector is well-placed to weather any challenges that lie ahead.”

The AIC said that the global sector is the largest investment company sector at end June 2016, with total assets of £22bn, as was the case a decade ago when assets were up £1bn at £23bn.

Property more than double

The second largest sector by total assets is the property sector* at £13bn, compared to just £6bn a decade ago when it was the fourth largest sector).  The Private Equity sector is the third largest sector by total assets (£13bn) and was the second largest sector a decade ago (£10bn).

The biggest change is the Sector Specialist: Infrastructure sector, which today is the fifth largest investment company sector, with total assets of £8bn, a sector which had total assets of just £246m a decade ago.

The AIC added that it is now 10 years since the first Sector Specialist: Infrastructure investment companies were launched. These were HICL Infrastructure in March 2006 and International Public Partnerships in November 2006.

Top 5 largest sectors by total assets at 30 June 2016

Sector Total assets (£m)
Global 21,709
Property sectors (combined total)* 13,207
Property Direct – Asia Pacific 594
Property Direct – Europe 3,659
Property Direct – UK 4,475
Property Securities 1,224
Property Specialist 3,255
Private Equity 12,559
UK Equity Income 10,137
Sector Specialist: Infrastructure 7,599

Source: AIC

Top 5 largest sectors by total assets at 30 June 2006

Sector Total assets (£m)
Global 22.668
Private Equity 10,063
UK Equity Income 8,416
Property 6,334
UK All Companies 4,415

Source: AIC

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