(September 13, 2013) — The UK is the home of consultants becoming asset managers, according to a European institutional investor survey carried out by Cerulli Associates.
Respondents were asked to name the top two locations where the trend of consultancies becoming asset managers was most pronounced.
The UK topped the first choice list with more than three-quarters of the vote, leaving the Netherlands in second place with the remaining 21.7% of the views polled.
Fiduciaries entering from the UK and the US should be aware that the Dutch fiduciary market is “already fiercely competitive and fairly saturated, with the number of pensions more than halved over the past decade to about 400”, the report said, adding that the “survivors drive hard deals”.
Consultants taking on asset managers at their own game and running the client money they used to place with third-party companies themselves is not a new phenomenon.
The rising levels of animosity between fund managers and their new consultant rivals reached a peak in March last year, when fund managers told aiCIO they were actively “kicking them out” of CIO pitches, fearing the consultants would take their knowledge and pass it off as their own.
“We’re cutting them out,” one European head of sales at an asset manager said. “We don’t even want them in the room when we are pitching. These are our ideas and they are now our competitors. We’re going direct.”
More recently, aiCIO has seen a trend of consultants leaving their consultancies to become asset managers: In 2010, Mercer lost its CIO to Axa Investment Management when Tim Gardener joined the manager as global head of consultant relations.
In 2012, Redington lost its co-head of asset liability management and investment strategy Ian Maybury to Schroders when he took on the role of head of solutions management at Schroders.
And earlier this week aiCIO reported that Divyesh Hindocha is to step down from his role as global head of investment research after more than two decades at Mercer to join Schroders as global head of product and defined contribution.
Conflicts of interest with fiduciaries can be managed however, and as Cerulli’s report explained, there are even some groups that have solid business structures separating asset management business from fiduciary work.
Manager selection for Dutch asset manager Robeco for example is done by its daughter organization, Corestone Investment Managers, for its fiduciary clients—a unit distinct from Robeco both legally and geographically, as it is based in Switzerland.
One investor noted that no Robeco products sit within a multi-billion euro fiduciary mandate it won in 2012 for Dutch transport pension Pensioenfonds Vervoer.
Another fiduciary manager with a French parent told Cerulli that it was made clear from day one that it was not obliged to implement strategies using its parent’s funds or expertise in portfolios.
Fiduciaries can also consider policies to prevent clients who use their fiduciary services from also investing in their funds, or stopping fund investors from being referred to their fiduciary units.
The full report can be read here.
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