Last updated: 09:57 / Wednesday, 26 March 2014
Cogent Report

Improved Market Conditions Allow Institutional Investors to Contemplate Big Moves

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Improved Market Conditions Allow Institutional Investors to Contemplate Big Moves
  • They are increasingly turning to specialized managers to fulfill their investment mandates
  • Few of the broad asset managers are poised to capture future mandates from both defined benefit pension and non-profit institutions
  • Only four, J.P. Morgan AM, T. Rowe Price, Dodge & Cox and Goldman Sachs AM rank in the top 10 among both pensions and non-profits
  • The needs and goals of pensions and non-profits are different, which presents a challenge for managers targeting the institutional market

Now that institutional investors in the US are reaping the rewards of improving market conditions, they are increasingly turning to specialized managers to fulfill their investment mandates. Yet, given divergent sets of needs, relatively few of the leading broad asset managers are poised to capture future mandates from both defined benefit pension and non-profit institutions. These and other findings are included in the annual US Institutional Investor Brandscape®, a Cogent Reports™ study by Market Strategies International.

“Recent favorable market performance along with the corresponding boost in funding status and portfolio returns are causing investors to take a careful look at their current strategies as they evaluate their options for the future,” explains Linda York, vice president and lead author of the study. “Pensions appear to be heeding the advice of consultants and industry experts by taking steps to de-risk their portfolios, shifting assets out of US equities in favor of fixed income strategies. In contrast, non-profits are seeking additional sources of diversification and higher returns, and as such are turning their attention to international markets.”

Of the asset managers that pension and non-profit institutions would most likely consider, Cogent reveals the overall consideration potential of 44 leading firms and the likelihood that these managers would be tapped for the specific asset classes of most interest. The results show that only four firms rank in the top 10 among both pensions and non-profits: J.P. Morgan Asset Management, T. Rowe Price, Dodge & Cox and Goldman Sachs Asset Management.

“The needs and goals of pensions and non-profits are very different, which presents a formidable challenge for asset managers targeting the institutional market,” says York. “Beyond the core aspect of investment performance, pensions look for partners with notable organizational stability and an experienced investment team. Meanwhile non-profits place more weight on a firm’s commitment to social responsibility and integrity, and it’s very difficult for asset managers to excel in all these areas. The few who are able to do so hold the keys to future growth.”

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