Research by Cerulli Associates, a global research and consulting firm, suggests that investment managers are seeking out bespoke solutions to help drive revenues over the next 1-2 years.
Reported in The Cerulli Edge – International Institutional Edition, the research suggests that managers are “adapting generic products to bring scalable customisation to a wider investor base”, according to Barbara Wall, Europe managing director at Cerulli. This customisation is based on attention to factors such as investor’s individual objectives, risk appetites and liability profiles. Also driving the shifting approach is recognition by institutions that they need to construct portfolios to meet long term funding requirements, while simultaneously dealing with regulation such as Solvency II.
Justina Deveikyte, associate director at Cerulli, added: “Cerulli believes the management space is polarizing into large players offering bespoke solution-style management for key accounts and a second tier of managers offering what could be called ‘off-the-shelf customisation.’ The latter means offering building block products that slot within large schemes’ portfolios or are packaged to give smaller investors the option to choose from pre-determined combinations designed to match common duration, risk, or target return profiles.”
“With the challenging macro environment set to endure for the foreseeable future, the need for bespoke solutions is not going away. However, the need for a new generation of customisable products to facilitate a smarter investment approach presents a significant opportunity for managers of all sizes in both the insurance and pension spheres.”
Looking more broadly at expectations around traditional asset classes, Cerulli notes that in the US, for example, institutional investors are looking to more illiquid private investments, including private equity, private debt, private real estate, and infrastructure to meet long term investment needs. And in Asia, there is evidence of a shift towards more multi-asset strategies, with managers there seeking to provide customisable solutions.
Multi-asset offerings are also important if managers are to be successful targeting institutional clients in the UK, Italy and the Netherlands, Cerulli adds, with survey results suggesting, for example, that half of those surveyed expect UK defined benefit schemes to favour multi-asset and diversified growth funds.
Click here to access the research: The Cerulli Edge – International Institutional Edition