Investment management firms are used for multiple assignments by 44% of pension funds surveyed by Eager & Associates, but fund executives have not fully embraced the one-stop shopping concept.
The survey by the Louisville, Ky., consulting firm shows a money manager's ability to invest in multiple asset classes is not a determining factor in most hirings.
The survey found only 36% of fund executives believe a money manager's ability to serve the plan in such an expanded role would influence their manager selection and retention. The numbers seem to show the trend of hiring "macromanagers" is not going as fast or as far as it's being touted, said David Eager, managing partner of the marketing research and consulting firm for investment managers.
The figures show "plan sponsors are not beating a path to the managers' doors as much as the investment managers to create the structure and the approach that's going to satisfy the sponsors' need for better advice on asset allocation, or reducing the complexity of the management structure," said Mr. Eager.
The survey found that in addition to the 44% of executives using managers to manage multiple asset classes, 31% are using them as advisers or sources of information; 18% are using them as asset allocators; and 16% are using them to provide trust, custody and record-keeping services.
Some 60% could name benefits to having a manager serve in an additional, advisory capacity. Such benefits include "tapping the manager's experience and expertise," "a variety of perspectives or comparing perspectives," "working with fewer people" and "comfort or confidence" in the information. On the other hand, 70% also listed key concerns in using them in that role, such as the potential for conflicts of interest created by the managers' dual function.
"It would say to us that the industry has not fully embraced the concept that so many people are endorsing," said Mr. Eager. "The onus would be on managers to structure and position themselves to satisfy the needs that exist."
Larger sponsors - those with $1.2 billion in assets or more - were more likely to use managers in a multiple asset classes and seek investment advice from them. On the other hand, smaller plans, with $200 million to $500 million under management, were more likely to use their managers for asset allocation.
The larger plans' reasons for using their managers probably relate to internal cost pressures and the need to simplify already complicated management functions, while the smaller plans need the advice more, said Mr. Eager.
The study also polled the sponsors who don't already use managers in multiple assignments, asking whether they intend to do so in the future. The responses varied widely, with many pointing to increased multiple assignments, but not at the accelerated rate predicted by conventional wisdom, said Mr. Eager.
"There's a meaningful amount of utilization of managers. There is some move in that direction. But it's not a groundswell," said Mr. Eager. He added that if the trend continues to increase it will be "because a meaningful number of managers did a very good job in positioning themselves."
The Eager & Associates survey, "Study of Macromanagers: Use of Investment Firms in an Expanded Role,"was based on interviews in March with 90 executives of corporate and public pension funds, endowments and foundations, each with more than $200 million in assets.