The potential for larger fund platforms to buy smaller platforms has increased owing to market pressures that benefit the bigger players.
The direct platform market – where funds are sold directly to consumers – has been “pummelled” due to investors struggling with higher living costs.
Fundscape, which gathers data on the platform market, said that in the second quarter, net flows to platforms were “in the doldrums” at £3.9 billion, which was 7% down on the same quarter last year, but much less steep in decline than in the same quarters for the two previous years.
Investors preferred cash products, said Fundscape’s Martin Barnett, head of content, albeit gross flows were comfortable at £11.4 billion, and the majority of platforms posted positive asset growth thanks to modest market gains.
Fundscape’s research, published in its The Direct Matters report, shows Hargreaves Lansdown to be the largest platform by assets, with £113.6 billion of assets under administration at the end of Q2 this year, representing a 1% growth through the quarter.
However, Vanguard was the fastest growing platform in monetary terms, adding £1.2 billion during the quarter, taking assets to £16.8 billion.
Fundscape highlighted InvestEngine, a smaller platform set up by former Gumtree people, as the fastest-growing direct platform in percentage terms, with assets jumping 32% to £215 million in the quarter. InvestEngine is an ETF-only platform.
Barnett said platforms would have to work hard to attract new flows and customers, with any improvements in market conditions disproportionately helping larger firms.
“The longer high inflation and interest rates continue, the greater the pressure on smaller platforms. We don’t expect the situation to improve until mid-2024 at the earliest. The door is therefore well and truly open for larger players to potentially acquire distressed platforms at knockdown prices.”
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