Saturday, 23 June 2012

OEICs set to benefit from automatic enrolment


IBISWorld
 IBISWorld offers a comprehensive database of unique
 information and analysis on many UK industries.
Open-ended investment companies (OEICs) look set to benefit when automatic enrolment of workers into pension schemes in the UK begins rolling out later this year.

That's the view of respected London-based industry research firm IBISWorld.

According to the company, which provides independent, accurate, comprehensive, and current research on hundreds of UK industries, OEICs have weathered the financial storm well compared with other pooled investment schemes because of better asset selection and portfolio construction.

OEIC revenues are expected to decline at only an annualised 0.4% over the five years through to 2012-13, to £33 billion.

Although not imune to the same systematic risk that caused the FTSE 100 to experience its largest decline in decades, the recent poor financial market performance has not deterred investments in OEICs.

Fund sales suffered a minimal dip in 2007-08, but remained popular with investors despite risk appetites diminishing, says IBISWorld.

Although most OEICs survived the financial crisis unscathed, several were forced to liquidate due to questionable asset selection. However, several trends emerged even during the financial crisis.

IBISWorld industry analyst Ee Jen Lee said, "Although numerous investors were forced to withdraw from the financial markets entirely, other investors were shifting their wealth from risky equity securities to less risky fixed-income securities such as corporate and government bonds".

But persistent volatility has dampened revenue growth, with uncertainty permeating from Greece and other heavily indebted eurozone members creating waves of market speculation detrimental to steady, stable market growth. As a result, industry revenue is forecast to grow at a relatively subdued rate of 5.0% in 2012-13.

However, OEICs can look forward to tapping into the growing institutional market over the next five years, with automatic enrolment in pension funds, which will be introduced from October 2012, anticipated to affect nine million people.

Ee Jen Lee adds, "OEICs with a strong distribution network and a good track record of performance will be well placed to benefit from an expected surge in demand from institutional investors."

As such, industry revenue is forecast to grow strongly over the next five years to 2017-18.

For more information on the Open-Ended Investment Company Activities industry, including latest industry trends, statistics, analysis and market share information, purchase the full report from IBISWorld.

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