Denmark has not traditionally been a substantial market for the investment consultants with the majority of asset managers dealing direct with their pension fund clients, thereby stripping a core source of business away of manager recommendations. However the situation has been developing albeit slowly over the past five years, with the usage of consultants spurred on by multinational companies whose subsidiaries elsewhere are well versed in the advisory arena. Danish multinational companies not surprisingly are looking to the larger international consultancies such as Watson Wyatt, Mercer and Frank Russell to chose managers. The local scene tends to be dominated by the smaller domestic operations and have little exposure to manager selection procedures opting instead to focus more on actuarial services, performance measurement and ALM though this latter service is not being conducted on a wide scale.
Growth could be spurred on by the Danish labour market funds, however, whose use of consultants is on the increase. Merger and acquisition activity is minimal in Denmark, with consultants instead focusing on finding niches for themselves rather than looking toexpand which would allow themselves to operate on a one-stop shop basis. Notably the investment managers also offer advisory services, Unibank for one is focusing on developing its own ALM resources and has recently teamed up with Danish actuary Edlunda to fund the further development of the consultant's existing software programmes. They are also focusing together on market and accounting risk studies. Risk management is becoming more important to Danish pension funds and consultants are taking note of this - at the beginning of this year international equity investment was now been upped to 50% from 20% within the euro currency domain. As a result, funds are looking for experienced international equity managers and will be looking to consultants to provide them with advice on managing the risk behind their international exposure. Rachel Oliver