Funds managed by Investment Association (IA) members reached a milestone figure of £10 trillion for the first time in 2021.

In a turbulent year, actively managed funds also bounced back and outsold index trackers for the first year since 2017, with inflows of £25bn compared to index tracking fund sales of £18bn.

While falling markets will likely cut the total invested this year the IA, the fund managers’ trade association, says the UK remains a leading world centre for investment management.

The latest IA Investment Management Survey shows a 6% year-on-year increase in assets under management despite the first quarter lockdown in 2021, supply chain disruptions and rising inflation in the second half of the year.

The IA says the growth is below the average growth rate seen over the past 10 years but the fact it rose during a tough year is a “mark of the resilience of the industry.”

The IA says the UK is second only to the United States internationally in terms of fund management. At the end of 2021, total assets managed for overseas clients rose to £4.6 trillion from £4.2 trillion in 2020, suggesting the UK is becoming “increasingly more attractive” for overseas investors.

The growth of funds under management with responsible investment criteria was a “standout trend in 2021”, the IA said. The amount invested in responsible fund rose £34 billion to £89 billion, a 62% increase. 

However, investors continued to turn away from UK equities as part of a longer-term shift to globally diversified portfolios. Funds under management in UK equities have fallen to 13% in 2021, down by 25 percentage points since 2006. 

North American equities for the first time accounted for the largest share of total equity assets at 30%.

The growth of indexing strategies slowed in 2021 with assets in indexing strategies reaching 32% of total assets in 2021 - a 1% increase year-on-year following a 10% increase over the decade since 2011. 

In the retail fund market, actively managed funds outsold index trackers for the first year in five years with inflows of £25 billion compared to sales of index tracking funds of £18 billion.

In 2021, institutional clients, such as pension funds, continued to account for the majority of investment management industry clients, forming 77% of assets under management in the UK. 

Last year also saw the acceleration in assets managed on behalf of retail clients – from 20% in 2020 to 22% in 2021. This small increase comes after a decade of little movement. 

In 2021, assets managed from Scotland reached £700 billion, equivalent to 7% of total AUM.

Chris Cummings, chief executive of the Investment Association, said: “Reaching the milestone of £10 trillion assets under management is a testament to the strength and resilience of the UK investment management industry during a challenging period. 

“However, with the war in Ukraine, rising inflation and energy prices creating very turbulent market conditions so far in 2022, we are unlikely to see the growth in assets under management continue at the same pace as we have in recent years.”

• The survey also found that the industry employed 122,000 people in the UK at the end of 2021. Three quarters work in London, while 19% work in Scotland and 5% work in the rest of the UK.