(January 28, 2013) – Asset owners moved to invest with their own herds in 2012—pensions in one direction and endowments/foundations in another—a broad survey shows, and the biggest asset management firms are suffering for it.
Major institutional investors (with holdings of $20 million and above) entrusted 40% of their assets to the 41 largest managers in 2012, down from 45% the year prior, the survey by Cambridge, Mass.-based Cogent Research showed. The firm polled 650-senior investors from pension funds (43% of the sample) and non-profit institutions (57%).
Linda York, Cogent’s director of syndicated research and a lead author of the report, attributed investors’ shifting tastes in managers to their shifting tastes in assets.
“Across the board, we saw that respondents anticipate decreasing their holdings in US public equities,” York told aiCIO. “Overwhelmingly, the investors surveyed would only consider the leading asset management firms”—giants like Vanguard and J.P. Morgan—“to be strong in US public equities. They don’t consider those firms to be very strong in other places. Either investors are not aware of the capabilities of leading asset managers, or it’s not what they want.”
Endowments and foundations seem to want just the opposite of the one-stop-shop management giants: small, niche firms with narrow mandates, which now control 54% of non-profit wealth. These institutions cut nearly a quarter of their average allocations to the big players between 2011 and 2012, from 40% to 38%.
“The thing that really stood out to me about these results was the divergent path that pensions and non-profits are taking in their approach to managing their asset pools,” York said. “Pensions are much more focused on de-risking, managing liabilities, and seeking competitive returns to meet future payouts. Non-profits, in contrast, are acting much more opportunistic. They’re looking for ways to capitalize on alternatives and seeking higher returns. If you’re one of these big firms, you really do have non-profits who are saying, ‘What new ideas do you have?’”