The Centre for Policy Studies has claimed 80 per cent of the fund management industry is "redundant".
The claim followed the recently released Asset Management Market Study conducted by the The Financial Conduct Authority (FCA), which raised concern active fund management is not good value for money for investors after data it collected pointed to a lack of benchmark beating performance.
According to Michael Johnson, representative for the CPS, the consequences for the asset management industry are "potentially devastating" with serious implications for the health of the country's pension funds as reflected in Melbourne Mercer Global Pension Index. This shows the UK’s pensions landscape continuing to slide down the global ranking.
In addition, the UK’s defined benefit schemes now have the weakest funding position in Europe, according to Johnson, and Britain has the highest proportion of company schemes (38%) flagged as being in the weakest 20 per cent of their industry peer groups.
The FCA report flagged found that institutional active investment products, on average, outperformed their benchmarks before charges were deducted.
But after charges there was no significant return over the benchmark for institutional products; retail active funds for sale in the UK, on average, outperformed benchmarks before charges were deducted, but underperformed benchmarks after charges on an annualised basis by around 60 basis points; and the FCA found that there is little evidence of persistence in outperformance, but there is some evidence of persistent underperformance.
Johnson said that the government, acting through the Department of Communities and Local Government (DCLG) as sponsor of the Local Government Pension Scheme (LGPS), had a "great opportunity" to exhibit leadership, in the interests of all members of funded pension schemes.
He said: "If private sector schemes were to follow DCLG’s leadership, the implications would be profound. Millions of scheme members would benefit, and it would become apparent that we do not need 80% of the industry."