GLOBAL – More worldwide pension funds are using consultants for some or all of their mandates, according to research by the Boston Consulting Group.
Consultant-influenced mandates, by number, have risen to nearly half of all US and close to three-quarters of all UK institutional mandates. In terms of the proportion of pension funds using consultants, the UK is by far the leader – 90% of pension funds used consultants for some or all of the mandates.
In Canada and the US the proportion is also high at 75% and 65% respectively. In Europe, 50% of Dutch funds use consultants, while the figure is 40% in Germany. Consultants are used by 20% of French funds and 10% of Italian funds.
Says Boston Consulting: “Both the plan sponsor clients and the asset managers themselves are driving the increasing use of consultants. Many clients perceive a need for more fiduciary oversight in a post-Enron world and are reacting to the impact of increased regulation by ‘outsourcing’ their selection of an asset manager.”
Further reasons given for the rise in the use of consultants include the increase in manager of manager products. Here “the consultant’s advice is implemented through its own manager selection, keeping the client once removed”.
Institutional clients are also setting up official tenders and therefore use consultants to aid in selecting asset managers.
With the rise in use of consultants has come the establishment of teams within asset managers that solely manage consultant relationships. Says Boston: “One US asset manager told us that the percentage of his firm’s new business stemming from consultants had grown from 10% to 50% over 2002. This is not atypical, especially in the US market, and the trend is also gathering steam (albeit at a slower pace) in Europe.”
BCG advises corporations in every global market and industry, and has more than 2,600 consultants worldwide.