EUROPE – A new poll has found that 67% of European institutional investors do not employ the services of an external investment consultant.

Invesco’s European Institutional Asset Management Survey for 2003 found that 67% of the 187 respondents said they did not use external investment consultants in the last 12 months.

The respondents were from Benelux, France, Germany, Italy and the UK and represent 935 billion euros in assets under management, Invesco says.

Of those that use consultants, 72% say they prefer domestic firms while 28% plump for international firms.

And there has been a shift in the way institutions use consultants, the survey found. Consultants’ primary role now is to carry out asset allocation, a change from 2002 when the survey found consultants were primarily used to select external managers.

Domestic consultants are being taken on for asset liability studies, then asset allocation and the selection of external managers.

Institutional investors’ priorities have shifted also, the survey found. It found that the most important objective when setting investment policy is now absolute performance, with risk coming in second. This is a reversal of last year’s result, when risk was seen as the key factor.

Equities now account for 24% of institutions’ asset allocation, down from 26% in 2002. Fixed income is currently allocated 54% up from 49% a year ago. Real estate is now five percent, down from seven percent.

“The market is changing and institutions, in turn, are changing their demands,” said Jean-Baptiste de Franssu, chief executive of Invesco in Continental Europe. “Investment managers will have to respond to those changing demands in order to succeed.”

De Franssu added: “Overall in 2002, institutional investors generally maintained their long-term strategies, and diversified their portfolios towards higher yielding bonds and new investment styles, such as enhanced index – for which they actively hired specialised managers.”