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IPE special report May 2018

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Multi-management to hit consultants, managers

UK - The increasing appeal of multi-managers will have an effect on both the UK consulting industry and the investment management industry, according to investment firms Frank Russell and Morgan Stanley.

Jon Bailie, managing director of Frank Russell, and Gareth Derbyshire, executive director of the European pensions group at Morgan Stanley, addressed the changes that the increasing move to multi-manager will have in the market place at the NAPF conference in Edinburgh yesterday.

Multi-management assets are increasing and pension funds are moving towards specialisation as a result of the poor performance of balanced management. The desire for greater manager diversification, style diversification, greater control over asset mix offered by multi-managers is attracting both large and small funds – with the latter now being presented with affordable access to specialists.

Bailie said the changes could see the consultancy market becoming less concentrated - with consultants possibly offering multi-management products or some form of multi-manager solution.

Consultants will also become more accountable - in line with trustees’ wishes and the Myners Review’s stipulation for a greater focus on strategy. And the outsourcing of solutions to delegate decisions will occur if deemed more effective. The role of the multi-manager can also reduce “implementation slippage” – consultants can make decisions to hire and fire, but often a lot of time passes before such decisions are implemented.

For the investment management market, the effects will also be seen said Morgan Stanley’s Derbyshire. Managers are likely to provide more consulting-type services, the market will be les concentrated as those “out of the loop” take on a greater role, and short track records will be more acceptable.

There may be some pressure on fees, but there is a limit to what quality managers will accept, Derbyshire said.

The role of the traditional manager will still be key, however. Multi-managers are not about to take over the world, and of those present at the seminar, the majority expected multi-management to account for only 10%-30% of pension fund assets in ten years’ time. “Multi-management funds do, however, pose a threat to pooled products,” Derbyshire said. He discourages the creation of new pooled products.

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