CAMBRIDGE, Mass.--(Cogent Research. These and other findings are included in the third annual U.S. Institutional Investor Brandscape™ report, which examines key trends in investment strategy as well as asset manager selection, usage, and loyalty. This report is based on a representative survey of over 650 senior-level investment professionals representing pension and non-profit institutions with a minimum of $20 million in assets.)--Institutional Investors are entrusting a smaller portion of assets to leading broad managers, according to a new report released by
“This trend should serve as a wake up call to firms targeting the institutional space”
The leading asset managers serving the institutional market are battling for a smaller piece of a dwindling pie. Cogent found that pensions, endowments, and foundations are utilizing the leading broad managers for just 40% of their institutional assets, down from 45% in 2011. In fact, these investors are now directing the majority of assets to specialized managers, other broad managers, or single manager hedge funds.
While this pattern of behavior is noticeable among pensions, the contrast is even more dramatic when isolating the non-profit institutions. Today endowments and foundations report utilizing the leading broad managers for less than one-third (32%) of their assets, down from 40% one year ago, choosing instead to direct 54% of their assets to smaller, lesser known managers with specific areas of expertise.
“This trend should serve as a wake up call to firms targeting the institutional space,” says Linda York, Practice Director of Syndicated Research and author of the study. “The 41 leading asset managers we track in our study face a formidable challenge in their attempt to grow their businesses, as fewer and fewer mandates are being directed their way.”
“The driving force behind institutions looking beyond the leading broad managers is tied to a lack of confidence in these firms’ capabilities in the asset classes that are of interest to investors today,” explains Christy White, Principal of Cogent Research.
Compounding the issue is the fact that pensions represent a smaller and shrinking proportion of the total number of institutions – just 43% of the market today compared with 48% in 2010. Endowments, foundations, and other 501(c)3 tax-exempt organizations collectively represent the majority (57%) of institutional investors and will have a greater influence on the future direction of the market as a result.
“Asset managers in the institutional space need to employ very different strategies depending on their target market,” York says. “As the pension market continues to shrink, an understanding of the unique needs of non-profit institutions will be critical to future growth.”
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