EUROPE - UK trustees are considerably more likely to rely on the advice of a consultant when choosing an asset manager than their European counterparts, according to consultant Oliver, Wyman and Company, and UBS Warburg. But the use of investment consultants in continental Europe is expected to increase.
Between six and seven investment consultants are employed for every billion euro of institutional assets in the UK, compared to three consultants in the Benelux, and Spain and Portugal, between one and two for Switzerland, Germany and Austria and the Nordic regions, and less than one for Italy and France.
Explains Stefan Jaecklin, senior manager at Oliver, Wyman: “in continental Europe the majority of assets are owned by a small number of big banks which have in-house services. There is little need to look to look outside for consultants as the funds will be managed in-house.”
This phenomenon is expected to change over the coming years, and intermediation by consultants is expected to increase sharply on the continent. The report believes this is due to the increasing size and complexity of pension funds, and at least partially reflects trustees’ desire to avoid censure for recent poor investment returns. Increasing activity in the realm of alternative investments will also call for advice from investment consultants.
“Poor performance of funds has led trustees to rethink their strategies. In the German market, for example, there has been a marked increase over the past two months in the number of investment consultants employed” says Jaecklin.
An increase in employment of investment consultants could open up the asset management market as in consulted markets international players typically benefit a the expense of domestic providers.
Says Oliver, Wyman and UBS Warburg, trustees going directly to an institutional asset manager will tend to select local players and be encouraged to award large, balanced mandates with low turnover of provider. In contrast, consultants prefer to recommend managers on their shortlists, which often include specialist or foreign firms. Consultants also seek to review performance and transfer mandates regularly.