Credit Suisse AM sees asset-allocation role

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EUROPE – Institutional investors will increasingly seek asset-allocation advice from their fund managers rather than from their consultant, believes Credit Suisse Asset Management.

As a result of the three-year equity market decline and impact on profitability, fund managers are increasingly having to offer sophisticated asset allocation advice – beyond just equities and bonds - says Robert Parker, deputy chairman of CSAM, the fourth largest manager of European pension fund assets.

Parker believes this coincides with in a change of role for the investment consultant.

“The role of the investment consultant, the traditional provider of asset allocation advice, is changing. The consultants are increasingly focusing on asset-liability studies and manager-selection advice with clients requesting asset-allocation advice from their fund managers,” says Parker.

Andy Green, head of investment strategy at consultants, Mercer, agrees that fund managers will increasingly be asked for their views by trustees, as schemes try to get a broader view of short, medium and long term implications in asset allocation for their schemes. However, this does not mean that investment consultants will cease to offer strategic asset allocation advice, says Green. "Trustees want to information from different sources. While fund managers offer short-term tactical asset allocation views, and investment consultants offer longer-term strategic asset allocation views, as trustees start to focus also on the medium-term it will encourge both consultants and fund managers to comment on a broader level."

Also according to Parker, the trend is prompting a revival of balanced fund management. Balanced fund management as a concept has been losing popularity since the late 1990s as the specialist model of fund management won favour, but Parker believes it is making a come-back – although the balance will be made across a more diverse range of markets and asset classes.

For example, there is now demand for real estate, alternatives such as hedge funds, specialist sub-components of equities and bonds such as private equity, structure products or high yield and emerging debt.

Parker believes the growing diversity will put pressure on fund managers’ costs, but, on the plus side, some of the advanced asset classes offer higher fee margins.

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