Asset Manager Alert: How NOT to Get Dropped by Your Institutional Clients

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The reasons for dropping a manager vary substantially among institutional investors in the US versus those in other countries, according to our new International Institutional Investor Brandscape study. In the UK and elsewhere in Europe, concerns over liquidity far outweigh all other aspects that institutional investors identify when dropping a manager from their lineups. According to the Financial Times*, liquidity issues are of particular concern in fixed income markets, and as a consequence, many asset managers are beefing up the skills and resources on their trading desks to more effectively identify suitable buyers or sellers on the opposite sides of complex fixed income trades.

Second to liquidity issues, European pensions cite lack of communication or responsiveness as a top reason for dropping a manager, signaling the importance of regular outreach and effective service teams in cementing client relationships. Planned shifts in asset allocation, investment team turnover and the desire to reduce fees and expenses round out the top five reasons for cutting a manager in the international institutional market.

In contrast, institutional investors in the US cite concerns over investment performance and fees as the top reasons that would prompt them to drop a manager from their lineups. Beyond these two aspects, consultant recommendations, along with differing opinions on investment philosophy and dissatisfaction with the investment team, are identified by one in ten US institutions as key issues that would cause it to drop a manager.

The Key to Client Retention for Institutional Asset Managers

The key to a successful client retention strategy lies in understanding the top issues and pain points that could prompt customers to look elsewhere. The bottom line for asset managers serving the institutional market is literally dependent on their ability to understand the concerns of their client organizations and effectively anticipate and address their clients’ needs before they become large enough issues to prompt an external search. US institutions are particularly sensitive to performance and fees, while European organizations require a different level of coordination both internally (between traders and portfolio managers) and externally (between clients and their relationship teams).

Top Five Reasons for Dropping an Asset Manager

UK and elsewhere in Europe

  1. Liquidity issues
  2. Lack of communication/responsiveness
  3. Changes to asset allocation
  4. Investment team turnover
  5. To reduce fees/expenses

Source: Market Strategies International. Cogent Reports™. International Institutional Investor Brandscape®. August 2016.

United States

  1. Investment performance
  2. Fees/fee structure
  3. Recommendation from consultant or advisor
  4. Investment philosophy
  5. Investment team

Source: Market Strategies International. Cogent Reports™. US Institutional Investor Brandscape®. January 2016.

 

Last month, I shared that there is an increased opportunity for new manager additions among international institutional investors. Click below to read the article.


Read European Pensions Open to Adding New Managers to Their Lineups

* “Liquidity Crunch Elevates Bond Traders,” Financial Times, March 20, 2016.

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