GERMANY - "Emotional" criteria like trust, reliability and even language have a significant influence on an institutional investor's final decision on whether to select a given fund manager, according to a recent study.
In 10 in-depth interviews with German institutional investors in autumn 2010 - among them two pension funds, one insurer and two foundations - the psychological market researcher creative analytic 3000 looked into the decision-making process when it comes to choosing managers.
The authors of the survey, entitled 'The influence of the brand on manager selection by institutional investors', said: "The regularly experienced reality in such selection processes is that the measurable differences between the best 2-4 asset managers is only marginal."
From the interviews, creative analytic 3000 concluded that "soft factors" were the winning criteria, "while the hard facts are 'only' the qualifying criteria".
The factors cited as "most important" by investors, in order of importance, included reliability proven by experience, performance, the competence of the asset manager's representatives, trust in the acting persons, quality of management and the speed of putting together a report.
Creative analytic 3000 stressed that the trust mentioned by the interviewed was always limited to the acting persons.
"This means business relations can be jeopardised if the acting persons leave the company, as the trust is linked to those persons and not the institution," the authors said.
Price and management fees were ranked top among the "less important" criteria, while sympathy, image in the industry and size were perceived as "not important", with size even having been mentioned negatively by some investors.
Several respondents themselves brought up the language issue, which had not been mentioned by the interviewees.
One investor is anonymously quoted as saying that he feels "uncomfortable" with presentations being given in English, but feels too embarrassed to say anything.
"There is a kind of subservience when it comes to English I do not like," the investor added.
Lastly, based on the interviews, creative analytic 3000 also concluded that investors accepted higher fees from foreign managers - mostly from the UK or US - than from German competitors.