Optimism about the overall business situation among investment management firms rose for the tenth consecutive quarter, but at the weakest pace since December 2011, the research showed. Profits were flat after two strong previous quarters of growth.
Business volumes expanded for a third quarter in the three months to June, and at the strongest pace since March 2013.
Although business with private individuals was flat, investment management companies benefitted from rising demand from industrial & commercial companies, financial institutions and particularly from overseas customers.
Employment increased at an above-average pace for a seventh consecutive quarter and is expected to rise at an even faster pace in the coming three months.
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Income from fees, commissions and premiums grew for a third successive quarter, although as expected the rate of increase moderated sharply from an exceptionally high pace in the previous quarter.
In contrast, income from net interest, investment and trading fell for a second quarter, also in line with expectations.
Revenues from both sources are expected to grow in the coming three months.
Total costs edged up in the three months to June and firms' expectations for growth in expenditure next quarter are the highest since December 2006. Average costs grew at the fastest pace since March 2013, having been flat for two quarters, and expectations for a similar rise in the coming three months.
Paula Smith, PwC's UK asset management leader, said: "Investment managers are upbeat about their prospects after a steady performance during the last quarter. Growth in business volumes and fee income is expected to continue over the coming months. Growing risk appetite is expected to boost activity with both retail and wholesale investors.
"Firms see the development of new products and services as increasingly important to growth. This reflects increasing investor demand for low fee products such as exchange traded funds. Investment in new post-retirement products could also grow over the coming quarters.
"Interest in international expansion as a source of growth continues to climb. This is matched by increasing interest in M&A and a continuing focus on strategic partnerships.
"The importance of recognised brands when entering new markets is only likely to grow. Investment managers will be hoping that inflows to European equities continue."

Some of the key findings from across financial services firms overall:

• 37% of financial services firms said they felt more optimistic about the overall business situation compared with three months ago, while 9% said they were less optimistic, giving a balance of +28%
• 48% of firms said that business volumes were up, while 15% said they were down, giving a balance of +33%
• Looking ahead to the next quarter, 44% of firms expect business volumes to increase, while 7% said they will decrease, giving a balance of +37%.
• 19% of financial services firms said they increased employment, while 32% said it decreased, giving a balance of -12%
• Firms expect employment to increase slightly next quarter (+5%).
• Income from fees, commissions or premiums fell in the three months to June (-10%), disappointing expectations for rapid growth (+34%)
• In contrast, income from net interest, investment or trading grew (+15%), beating expectations (+8%)
• Total operating costs rose slightly (+7%), much less than expected (+41%), but still pushing up the average operating cost per transaction (+15%)
• Profits fell slightly (-5%), contrary to expectations of a robust rise (+30%).
• Nevertheless, firms are confident that profits will return to growth next quarter: 42% of respondents expect profits to increase, while 12% expect them to decrease, giving a balance of +30%.