The latest research from global analytics firm Cerulli Associates found that assets overseen by different types of institutional investors in the U.S. rose about 6% in 2014, compared to 9.8% in the previous year.
“Institutional assets experienced more modest growth than the strong equity markets of last year,” said Chris Mason, research analyst at Cerulli. “This modest overall growth masked substantial growth among several institutional channels, representing continued addressable market opportunities for institutional asset managers.”
One area of significant growth was in the growing demand by institutional investors for more customized investment solutions. “Custom solutions assets have more than doubled since 2010 from about $500 billion to more than $1 trillion last year,” stated Mason. “Cerulli’s projections show increasing demand for custom solutions in the next five years from corporate pension plans, public plans, and non-profits.
Cerulli’s research also finds that asset managers and investment consultants are moving rapidly to address the demand for sustainable investments by U.S. institutional investors. “Asset managers and investment consultants that focus on environmental, social, and governance (ESG) factors will benefit from increased demand as different stakeholders place more pressure on investment committees to consider such factors in their investment decision-making process,” explained Mason.
According to a proprietary survey done in partnership with The Forum for Sustainable and Responsible Investment (US SIF), 64% of responding asset managers indicated that they believe it will be “very important” for managers to offer ESG capabilities in the next 2 to 3 years in order to compete in the marketplace.