Institutional investors face market conditions and investment challenges and opportunities that haven’t been at the front of their minds for more than a decade.
In response to higher inflation and interest rates, institutional investors searching for opportunities are looking at current market conditions, but their attention is also focused on asset managers’ long-term capabilities, expertise, and capacity, according to a recent Cerulli Report.
Top factors for consideration include, scale (85%), experience with similar clients (55%), and specialisation in a specific asset class (53%). With so much focus on adequate asset allocation in the face of the volatile market environment, it is unsurprising that expertise in a specific asset class would be important for evaluating mandates, according to the Boston-headquartered international consultants.
From a service perspective, investors want access to investment decision makers (portfolio managers and analysts), with 38% stating this as a very important element of client service. Clients often turn to portfolio managers to obtain updates on how investment strategies materialise and to learn of any changes they should expect with buys and sells in the portfolio. Overall, 33% of investors state they have quarterly meetings and 31% note that annual meetings occur with portfolio managers.
“These aren’t just transactional sales—they are client relationships,” said Laura Levesque, director at Cerulli. “Investors want to be certain that communications about investment progress and any important events related to their investment will be properly communicated to them.”
Cerulli recommends asset managers maintain focus on their existing clients as much as prospective opportunities. “The longer a firm keeps a client, the more profitable the relationship becomes,” says Levesque. “Given the abrupt change in the market, asset managers will need to get ahead of any pitfalls to retain clients. In the long run, deviating from stated mandates will be far more likely to get a strategy terminated than short-term poor performance.”
