Willis Towers Watson has launched an “asset management exchange” designed to provide asset owners with centralised access to managers and standardised fund infrastructure, thereby reducing costs and providing other benefits.
The Asset Management Exchange (AMX) will provide ready-built infrastructure for fund managers, which the consultancy said would allow managers to concentrate on investment rather than operational matters.
Willis Towers Watson described the venture as an “institutional asset management marketplace designed to fundamentally transform institutional investment for the benefit of the end saver”.
Oliver Jaegemann, global head of AMX, told IPE that when a pension fund chooses to allocate assets to a given manager, it effectively makes two outsourcing decisions, one being an investment decision and the second to do with infrastructure.
“What AMX does is provide clients with a single point of access to a range of asset managers and it provides centralised infrastructure,” he said. “So instead of managers doing all the infrastructure work, that all gets done by AMX centrally on a scale that means the end result is both better and cheaper.”
The logic, according to Willis Towers Watson, is that this will allow asset managers to concentrate on running investment strategies and give asset owners benefits such as better governance, more transparency, control – and lower costs.
The exchange is launching in the UK first, and has been seeded with around $750m (€711m) of the consultancy’s delegated hedge fund assets, invested in two funds. More asset classes are due to follow later this year.
Jaegemann stressed that the new service is not a platform but an exchange, and although it needs to be attractive to asset managers “it was built almost 100% just looking through the lens of an asset owner”.
He explained that the exchange essentially hosts managed funds/pooled vehicles for which AMX is the “headline asset manager”, but with the investment strategy and trading outsourced to the underlying manager.
“Everything else then falls into the domain of the exchange,” he said.
This includes selection of back-office providers, lawyers, custodians, auditors, and counterparties.
Chris Ford, global head of investment at Willis Towers Watson, said: “We have long contended that intermediaries in the investment industry have taken too much out of the value chain to the detriment of the end saver.
“We believe AMX will change this by standardising and centralising the investment vehicles that managers and investors use thereby reducing overall costs and increasing marketplace transparency and competition.”
The consultancy has around 25 people working on the exchange, and expects this to reach 40 by the end of the year.
The exchange is “open architecture”, meaning it is open to all institutional asset owners and asset managers, not just Willis Towers Watson clients.
More than 10 asset managers are “in various stages” of joining the exchange, while on the asset owner side the consultancy is using the exchange for some of its delegated assets, with more to follow soon, according to Jaegemann.
In developing the exchange the consultancy learned from the experience of “a very large” European pension scheme that ran its hedge fund allocation using an internally run managed account platform, he said.
The announcement comes as UK consultants have come under pressure from the Financial Conduct Authority, the UK regulator. Late last year it published a wide-ranging review of the asset management industry, which included the prospect of a competition inquiry into the investment consulting sector.