UK – Mellon Financial Corp.’s Newton Investment Management, says institutional assets have fallen to just under 50% of total assets under management – although they remain “core” to the firm.
This comes as Newton has experienced changes in its client asset portfolio, said chief investment officer Jeff Munroe.
“Our client mix is changing. We have just under 50% in institutional assets, the retail side is moving ahead and the private investment management side is growing, including our charity sector,” said Munroe.
“The business is shifting, and we are adapting business to new things that investors need as we shift from balanced to specialist.”
Rivals such as Schroders have seen the proportion of retail and institutional assets balance out at around 50:50.
Newton is one of several separate asset management businesses owned by Pittsburgh-based Mellon.
Munroe was speaking at the ‘Newton 2005 Institutional Investment Conference’ in London. The main focus was the future of long-only investing.
Newton’s assets under management have more than quadrupled since the early 1990s when it had £4.3bn under management. It currently manages £25.5bn of assets, and 70% of its institutional assets are global.
According to Munroe, “The institutional side of the business is core at our predominantly equity and fixed income house.”
Newton’s chief global strategist Tim Wilson predicted a long-term economic landscape characterised by “low inflation, low growth and low interest rates. The market implications mean low average returns,” he added.
He urged pension fund trustees and consultants to select investment strategies with care.
“Just as it’s important to select the right club on a golf course, it’s also important to select the right strategies. You can’t putt with a driver and you can’t drive with a putter.
“We need to move away from benchmarks and be active, and get excess returns,” he said.
The presentation focussed largely on investment opportunities in China, India and Japan over the next 50 years.
“Essentially what we will see is a demise of Europe and the ascendancy of Asia. Currently China and India have 3% of the world index. We therefore need to come outside benchmarks and get exposure,” said Wilson.
According to Wilson and Munroe, liability-driven investing (LDI) is unlikely to increase unless there is greater instability in the equities market.
“You can invest in equities with returns of up to 7% but use derivatives to hedge against fall,” said Wilson.
While Newton has been approached regarding LDI, Munroe believed it occurred more regularly among smaller companies with sizeable pension funds.