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Cogent Reports: Active Managers on Shaky Ground in the Institutional Market

More than half (52%) of institutional investors with $500 million or more in assets are likely to drop one or more of the asset managers they currently work with within the next year. Even more alarming, one of the most cited reasons prompting these impending actions is the desire to switch from an active to a passive manager. These and other findings are included in the annual US Institutional Investor Brandscape®, a Cogent Reports™ study by Market Strategies International.

According to the report, Vanguard benefits the most from this shift from active to passive management and is the manager most likely to be considered for future mandates by both pension and non-profit institutions. Impressively, Vanguard has held the leading position over more than 50 other asset managers for three years in a row.

Top Five Asset Managers Considered for Future Mandates

(Aided Consideration)
 

Pensions         

 Rank
   Firm
 2017    2016  2015  
 1  1  1  Vanguard
 2  2  3  BlackRock
 3  5  11  PIMCO
 4  15  18  American Funds
 5  9  2  T.Rowe Price
 

Non-Profits

 Rank      Firm 
 2017 2016  2015   
 1   1  1  Vanguard
 2  2  2  BlackRock
 3  7  6  PIMCO
 4  9  7  Dodge & Cox
 5  12  10  American Funds
 
Source: Market Strategies International. Cogent Reports. US Institutional Investor Brandscape®. February 2018. 
 

“Strong, consistent investment performance is a must-have in order to attract new institutional assets,” explained Linda York, senior vice president at Market Strategies and author of the report. Yet performance is not the only factor that will cause a manager to get hired or fired. York continued, “While active managers need to acknowledge the threat that passive management poses, they have the opportunity to draw attention by demonstrating a unique investment philosophy backed by an experienced investment team. Many of the firms nipping at Vanguard’s heels are doing just that.”

“Some of these firms have made impressive moves into the top five,” added Christopher Barnes, managing director of financial services at Market Strategies. “PIMCO and American Funds, for example, clearly demonstrate that strategic moves and the strong expression of value to the marketplace can improve consideration. We know where there are holes in the market and how, with the right formula, firms can take advantage of them to make powerful moves up in the rankings.”

About US Institutional Investor Brandscape

Cogent Reports conducted an online survey of a representative cross section of 371 investors managing $100 million or more in institutional investable assets from October 13 to November 28, 2017. Survey participants were required to play a direct role in the evaluation and selection of investments or asset managers within their organization. In determining the sampling frame for this study, Cogent Reports relied upon the Standard & Poor’s Money Market Directories (MMD) database of institutional investors. To ensure the population for this research was representative of the universe of institutional investors, strict quotas were established based on a nested classification of institutional investor category and size of assets. Minimal weighting was applied to adjust for purposeful deviations from the actual marketplace distribution. The data have a margin of error of ±5.09% at the 95% confidence level. Market Strategies will supply the exact wording of any survey questions upon request.

 
 
 

For more on US Institutional Investor Brandscape, review an overview.

 
Review an Overview of the Report

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