What Will Distinguish Top Asset Managers in 2013? Innovation, Researchers Say

As defined contribution plans continue “the quest for new innovative products” in the alternatives space, money managers are going to have to notch up their product creativity.  Pension plan managers are looking for managers with unbundled fund options and customized target-date funds that offer multiple manager inputs. This search trend has created some challenges for large money managers as their smaller competitors have been able to adapt quickly to the needs of the DC plan market.

Pension Plans are also seeking more options in real assets, real estate, and private equity, and customized target-date funds provided by nimble small managers are allowing plans the flexibility they need for these allocations. This is good news for smaller managers, as asset owners are “basically asking for investment strategies traditionally managed by smaller managers,” said Ben Olmstead of eVestment LLC.

So what; is a large asset manager to do? According to research from Casey, Quirk & Associates and Cogent Research LLC, large managers could create replication strategies, refocus on product development and differentiation, and “recognize the shift” away from traditional equity and fixed income. While the largest managers are still growing assets, the managers that find a way to focus on asset classes and build expertise or differentiation have a chance to stay in the game, said Gary Shub of Boston Consulting Group.

Another arena larger managers are competing with their smaller peers is in emerging markets, where equity and debt saw more than $50 billion in inflows last year. However, while “it’s not too late to get in (to emerging markets),” Benjamin Phillips of Casey, Quirk & Associates said, managers will “need a highly differentiated product” to find any opportunity.

The Road Less Traveled

Here are some recent articles from Pension and Investments we found that illustrate plan sponsors’ search for innovation:

Demand for innovation threatens biggest firm
(Pensions & Investments, Kevin Olsen, February 18th , 2013)

Pension funds are unlikely to be part of any big equity push
(Pensions & Investments, Thao Hua, February 4th, 2013)

To share your thoughts about what you are seeing in the pension industry please get in touch with Francoise Van Keuren via email: fvankeuren@iirusa.com. 


-The IIR Alternatives Team

Posted in: Asset, Boston Consulting Group, Innovations, Investment, Investment management, Kevin Olsen, Pension, Pension Plans, Private Equity, Target date fund