The Shape of Things to Come – The UK Investment Management Industry in 2035

The UK investment management industry is entering a period of structural change. By 2035, growth in pension assets, the rise of passive strategies, expanding private markets and rapid advances in technology will reshape how assets are managed, distributed and regulated

By Paul Taylor

The UK’s investment management industry is at a crossroads.

Over the past decade, it has wrestled with BREXIT, regulatory reform, the rise of passive products, an institutional push into private markets, and a complex network of sustainability rules.  This has resulted in (a) cost pressures, (b) complex, messy operating models and (c) pressure for increased investment returns.

Looking ahead to the years in time to 2035, most of the signals point to an industry that is bigger, more specialised, more data-driven, and more regulated in different ways.

This blog looks at the most likely shape of the industry in 2035 as well as discussing the drivers that will get us there, the risks that could derail it, and what managers, advisers and savers should expect and do.

Big-picture headline: larger assets, but a different mix

By 2035, the UK is likely to still be one of the world’s largest asset management centres.  The size will be driven by continued growth in defined-contribution pension pools, insurance investments, and overseas clients using London as a distribution hub.

That growth will not be purely organic.  The UK government's industrial strategy and policy must be structured to continue to make the UK both (a) attractive for new investments as well as (b) compelling to retain its current investment activity.  

The predicted assets under management (AUM) will be materially higher than today, but with a different mix and composition.  There will be more private markets, more ETFs/ETPs (including active ETFs), and a much larger share of assets managed for retirement-income solutions and tax-efficient saving vehicles.

Regulation will be smarter, outcome-focused, but paradoxically lighter in places  

In one transformation Pasqualicchio reflected on, the roadmap was clear and the technology was robust, yet progress slowed due to a lack of broader engagement. People were completing tasks, but not actively driving the change, and the energy and belief behind the transformation were missing.

“Without that engagement, resistance started to build quietly. Progress slowed, and even small challenges felt bigger than they should have.”

This kind of quiet resistance is one of the biggest risks in operational environments. It does not show up immediately in dashboards. But over time, it erodes momentum and delays return on investment.

Leadership, therefore, is not simply about sponsorship. It is about visible commitment. Leaders must consistently communicate the “why,” model the behaviors they expect, and remove barriers that slow adoption.

Regulation in 2035 will likely feel very familiar as now, but there will be two new emerging trends:

Trend #1 - Outcome-focused consumer protection and anti-greenwashing.

Over the last few years, the FCA has moved away from box-ticking to outcome-based rules and clearer sustainability disclosures. For example, the Sustainability Disclosure and Labelling Regime (and related anti-greenwashing rules) has already forced managers to be explicit about claims and to publish robust product disclosures.

By 2035, those requirements will be embedded with product labelling, entity-level disclosures, and third-party verification will be normal.

Therefore, the industry should expect much more standardised sustainability metadata in product documents so platforms and advisers can compare “like for like” on environmental and social outcomes.

Trend #2 - Focused relief for smaller alternative managers, but increased oversight where systemic risks exist.

UK policymakers have gestured a wish to make the UK an attractive place for funds and alternatives.

At the same time, the regulator has explicitly flagged private markets, valuations, and financial-crime controls as supervisory priorities because the move into illiquid assets creates new operational and integrity risks for the industry as well as investors.

Therefore, the expected outcome by 2035 is a more tiered regulatory landscape where smaller niche managers face a lighter administrative burden, but larger (and most importantly) systemically significant managers face much tighter governance, valuation and financial crime expectations.

Passive products will become the baseline

By 2035, the passive surge that accelerated in the 2010s and early 2020s will have settled into a steady normal structural feature. This means that ETFs and index-tracking strategies will be the default low-cost core for many investors, and in particular for retail and workplace savings.

But, there will be two paradoxical forces that will shape product mixes:

Active reinvention via data and active ETFs.

While passive investments will become the norm, active management will not disappear, but rather it will split into two parts.

• The first will contain true high-conviction, skill-based active managers who can show consistent, risk-adjusted outperformance (or superior downside protection). This group will retain premium mandates from institutional clients.
• The second group will contain active strategies packaged as ETFs. This will become a major growth vector because they combine both active management with the benefits of liquidity, operating efficiency and the distribution advantages of ETFs. Therefore, expect active-ETF innovations (multi-asset and thematic alpha strategies) to be a mainstream product class by 2035.

More sophisticated passive layering.

As passive becomes more important, this area will become more complex and layered. This means that liability-aware index funds, custom indices, and “smart-beta” building blocks will be widely used by advisers and DC schemes to create low-cost, scalable retirement solutions.

Pensions and Institutional – Continued consolidation will create scale.

One of the clearest near-term structural shifts is consolidation in the defined-contribution (DC) market as well as the continuing demand from UK pension schemes for outcome-based or liability-driven solutions.

UK Government reviews and industry movements are pushing DC schemes toward larger, more professional master trusts and consolidation. This means that bigger pooled structures mean larger mandates for managers, greater appetite for illiquid private market allocations, and stronger bargaining power on fees and governance.

This means by 2035, the industry should expect a smaller number of very large workplace savers and master trusts that channel enormous, patient capital into both public and private markets.  This will also boost allocations to infrastructure, private credit and real assets, which are areas where managers with operational expertise will win mandates.

Technology and operating models to support AI, automation and orchestration. 

Technology will be the operating system of the 2035 industry, but three areas stand out.

AI-driven research and portfolio construction.

Generative and predictive models will turbo-charge idea discovery, scenario what-if analysis, as well as risk forecasting. Managers who use AI to enhance (but not replace) investment judgement will deploy models for trade execution, liquidity monitoring, risk management, and client reporting.

Operational standardisation and cost compression.

Back-office automation, cloud-native platforms, tokenised settlement (in pockets), and standard APIs will reduce operational friction and permit more integrated fund manufacturing. This lowers costs for scale players but intensifies competition. Therefore, boutique managers will need specialist alpha or unique data to justify higher fees.

Better client experience and personalisation.

Robo-advice, digital wrappers for retirement income, and personalised portfolios based on lifetime income modelling will widen access to professional management, especially for retail investors previously underserved by advice.

Scale Matters, but the niche will survive.

Scale will remain an advantage.

Large managers (who can invest more easily in technology, compliance, and global distribution) will continue to dominate significant AUM.

But the industry will not be a monolith dominated by these super-large managers.  There will be specialised boutiques that will have domain expertise (such as climate infrastructure, frontier markets, niche quant, etc) who will be able to demonstrate investment performance.  It is also expected that these boutiques will partner with other boutiques and/or with other bigger platforms for distribution or operational scale.

Regulation that reduces burdens for small managers will help new entrants, while institutional investors will increasingly use open architecture to combine scale manager low-cost cores with specialist active sleeves.

Risk and wildcards that the industry should be aware of.

A forward view to 2035 must acknowledge uncertainties:

Macro shocks/market structure events.

Large disruptions could accelerate de-risking into cash or drive forced selling of illiquid assets. Poorly designed retail alternatives to private markets could cause regulatory backlash or liquidity problems.

Regulatory fragmentation internationally.

Post-Brexit divergence between UK and EU rules could create tensions for cross-border products. The UK may choose deregulatory steps in some areas while tightening outcomes in others.  This will both create opportunities, compliance complexity and UK/EU tensions.

Technology risk and model failures

Over-reliance on black-box AI without robust governance (or understanding) could cause costly mistakes, regulatory scrutiny, a lack of trust and reputational issues.

Reputational shocks around greenwashing or governance failures.

Sustainability claims that are not backed by measurable outcomes will invite market and regulatory responses.  This means that investment managers must insert authentication and impact measurement to avoid reputational damage and a drop in trust.

What does this mean for the different market players?

Four main groups could be impacted:

Large asset managers:

They will need to invest heavily in technology, compliance, and product engineering. Therefore, the industry should expect scale-driven margin compression.  This means that differentiation will come from distribution, bespoke institutional solutions, and exclusive private-market capabilities.

Boutiques and specialists:

Due to their smaller size, they will need to double down on measurable alpha, niche data, and partnership distribution. They should consider operating models that outsource non-core functions to reduce overhead.

Advisers/platforms:

There will be a move toward modular advice and efficient core building blocks (such as ETF cores or a baseline with overlaying active sleeves). They will need to provide personalisation (such as life-time income modelling, behavioural nudges) at scale to provide a competitive edge.

Retail investors/savers:

Investors will benefit from lower-cost cores, better reporting and more sustainable choices.  However, they will need to be wary of complex private-market products that may look attractive but are illiquid, complex and costly.

To conclude

By 2035, the UK investment management industry will

• Be larger in aggregate and more diversified in product and client composition.
• Passive and ETF products will provide the plumbing (i.e. a low-cost, liquid baseline) while specialised active managers and private-market specialists supply the return-seeking sleeves that institutional investors and higher net-worth clients want.
• Regulation will push transparency and outcome-focused disclosures.
• Technology will transform operations and client engagement; an
• Pensions consolidation will concentrate huge patient pools of capital that reshape asset allocations.

To ensure they can prosper (or even just survive) in 2035, investment managers need to (a) combine scale-efficient operations, (b) implement strong governance, (c) demonstrate investment skill (or reliable low-cost solutions) and finally (d) turn complex sustainability and private-market issues into verifiable outcomes.

The losers will be those who cling to old distribution models, ignore the cost/fee pressures of passive flows, or fail to embed robust governance around AI and private markets.

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About Paul Taylor

Paul Taylor is a consultant, board advisor and non-executive director with more than 35 years of experience leading transformation across financial services, technology, and education.

A published author, speaker and Open University lecturer, he specialises in change management, investment operations and governance, helping organisations navigate complex technology and regulatory change. 

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