Pinpointing Growth Opportunities in the Institutional Market

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While an understanding of current asset allocation practices is always valuable for asset managers, uncovering the asset classes institutional investors will look to in the future provides key insight into potential areas of growth and opportunities to expand a firm’s share of institutional assets. This year’s US Institutional Investor Brandscape report includes an analysis of anticipated changes to asset allocation by asset class, uncovering the areas of most demand for future mandates.

Overall, demand for active fixed income and alternatives is on the rise among both pension and non-profit institutional investors. However, breaking down each group’s top three asset classes poised for growth in the next three years shows pockets of even greater opportunity. It’s important to note that these figures represent the percentage of institutional investors forecasting changes in their use of particular asset classes and NOT the percentage of assets they are likely to move.


US fixed income, both actively and passively managed, will continue to be in demand among pension investors across all asset size segments in the next three years. Notably, the use of alternatives is attracting more interest among this group this year than in the past, with an expected net increase of 24%. $1 billion-plus pensions report the highest anticipated positive net change in alternatives (35%) and passively managed US fixed income (33%), indicating rich opportunity for asset managers. An increase in one asset class inevitably leads to a decrease in another—24% of pension investors intend to draw down their allocation to US equities in the next three years, a trend from previous years. Continue reading

Satisfaction With Institutional Asset Managers Has Taken a Hit

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Satisfaction with Institutional Asset Managers Has Taken A Hit | Cogent Reports

It’s no secret that 2017 closed with a period of remarkable and sustained market expansion. Capping a year that featured strong economic growth, an improving job outlook and bolstered consumer confidence, the Dow Jones Industrial Average index hit record high after record high in the fourth quarter.

Despite this historic bull market that boosted performance for many investment strategies, institutional investors’ overall satisfaction with their existing asset managers has declined sharply from the previous year. Specifically, institutional investors surveyed in the eighth annual US Institutional Investor Brandscape® study report an average top 3-box satisfaction score of just 60%, versus 67% in 2016. Continue reading

The Secrets of How, When and What in Institutional Marketing

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Institutional marketing in the financial services space involves outreach to a  specific individual within an entity, company or organization with responsibility for hundreds of millions of dollars. These individuals typically represent large pension funds, endowments or foundations who frequently consult with internal or external peers as well as investment consultants before implementing any changes in their investment strategy.

As you can imagine, marketing to this particular audience requires a degree of finesse that is best informed by understanding the client’s mission,  needs and current investment approach. Surprisingly, this is where many marketing projects begin to falter. Continue reading

Is ESG Investing Relevant in the Institutional Market?

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Environmental, social and governance (ESG) investing is continuing to impact the wealth management space. As individual investors become increasingly concerned with the ethics and environmental impact of the companies they are supporting, they are passing that concern on to the institutions that manage their investments. In fact, ProxyPulse*, a report by Broadridge and PwC, found a growing momentum of ESG proposals in proxy meetings in 2017. Following the US withdrawal from the Paris Climate Accord, the report also suggests an expected increase in questions from shareholders on environmental impact and climate change in 2018.

To keep a pulse on the growth in the ESG category, Cogent tracks interest in and usage of ESG investing among all the audiences we survey: financial advisors, DC plan sponsors, affluent investors and institutional investors. Specifically in the institutional market, we added a new question to this year’s US Institutional Investor Brandscape report, fielded late in 2017 and publishing this month. We asked institutional investors in the US how likely they were to adopt ESG investing in the next 12 months. We found that, while few institutions have already incorporated ESG in their portfolios, usage is considerably higher in the non-profit sector, where the approach to investing tends to be more mission-based than is typical among pensions. Continue reading

Institutions Sticking With an Active Approach

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Throughout 2016 and into 2017, there has been no shortage of news coverage on the shift of assets from actively managed to passively managed investments in the wealth management industry. With the heightened focus on investment-related fees and increased skepticism over active portfolio managers’ ability to outperform the market index over the long term, many industry pundits are projecting a massive consolidation of active asset managers in the future, with only the strong and the few able to survive.

Yet at least one segment of the market continues to offer opportunity for active managers: the institutional market.

In fact, our research conducted in Q4 2016 found that institutional investors were reaffirming their commitment to actively managed strategies a maintaining or even increasing their active asset allocation levels despite the uncertain political climate during the latter half of 2016. Continue reading

Institutions’ Growing Appetite for Risk

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The search for higher returns is the leading driver for asset allocation shifts


The 2016 US presidential election sparked waves of populism and uncertainty. For the financial markets, the possibility of a Trump presidency seemed to cause a risk-on mentality, as his tweets were met with positive market reactions. And even before the Dow Jones Industrial Average surpassed 20,000, institutional investors signaled they were also adding risk. The survey fielding of our US Institutional Investor Brandscape report, fielded from mid-October 2016 to early January 2017, gives us a unique snapshot of the reactions of institutional investors in a distinct period for all of us.

Both pensions and non-profits de-emphasized de-risking as a driver of asset allocation changes this year. While de-risking is less of an issue for non-profits compared with pensions, this finding corresponds to the risk-on market mentality. Importantly, de-risking was the leading driver of asset allocation shifts among pensions in previous years and $1 billion-plus pensions continue to focus on risk. At the same time, corporate defined benefit plans place greater emphasis on the search for higher yield at the expense of de-risking. Continue reading

Stalwart Leadership in a Conflicted World

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The “new normal” catch phrase emerged after the Great Recession, marking a new era in investment management. Predictions of high correlations, muted returns, increased volatility and sustained low interest rates were true for a period. But fast-forward to 2017, and this period seems to have come to an end. Correlations have declined, the Dow Jones Industrial Average broke 20,000, the VIX stabilized and the Federal Reserve raised short-term interest rates in a show of confidence in the strength of the US economy. One could use the term “utopian,” perhaps, for characterization of recent market events.

At the same time, US politics has deeply divided the country across economic, gender, racial, religious and philosophical lines. Trust in political leadership is at an all-time low, and book sales of George Orwell’s 1984 are near all-time highs. Many view the current landscape as a “political dystopia.” Continue reading

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. Continue reading

Not All Institutional Investors Are Alike

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Uncertainty in China. Falling oil prices. Volatility in US equity markets. The Federal Reserve raising interest rates for the first time since 2008. All of these factors converge to create an unsettling environment for institutional investors. As a result, these investors are re-examining their portfolios and reassessing their use of different asset classes, investment products and asset managers. But the needs, perceptions and behaviors of institutional investors vary dramatically by asset size and category, proving the adage that not all investors are alike.

For asset managers serving the institutional market, the need for focus has never been greater. Determining the right business strategy, product offering and competitive positioning is to a great extent dictated by the segment of the market being targeted. Firms can choose to develop a scalable approach for the smaller institutions or pursue the polar opposite with customized solutions for the largest institutional clients. In either case, understanding the forces driving market needs and the factors impacting the competitive environment is critical. Continue reading

Warning: Institutional Investors Express Discontent

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Warning_Institutional Investors Express Discontent

In the institutional market, industry average satisfaction scores are trending downward on many measures this year, which should warn asset managers serving this space.

Investment performance remains a key driver of satisfaction across all segments of the market, particularly the larger non-profits managing $250M+ in assets. Yet additional opportunities avail themselves to asset managers seeking to deepen client relationships beyond the investment performance metrics. A distinctive investment philosophy, strong investment team and attentive service approach can all serve to boost satisfaction levels among current clients. Particular areas of weakness for many firms this year include meeting client expectations with the aspects of investment performance, service and support, product innovation, alignment, and social responsibility. Continue reading