The booming manager-of-managers business offers “a compelling opportunity” for third-party investment managers to increase their assets under management, according to a new Cerulli Associates report. Although more than 97% of the institutional manager-of-manager market share has been claimed by three players — Russell Investments, 38%; SEI Investments, 33%; and Northern Trust, 26% — smaller firms have grabbed 65% of the retail business. Working for smaller manager-of-manager firms might earn subadvisers higher management fees because they lack the pricing power of powerhouses like Russell and SEI, according to Cerulli.
Globally, pension reforms will cause contributions to defined contribution plans to swell, and Cerulli predicts retail manager-of-manager assets will grow 15% annually to an estimated $443.8 billion in 2011 from an estimated $253.8 billion in 2007. Of managers of managers contacted by Cerulli, 77% said they welcomed asset managers called to set up meetings “assuming (managers have) reasonable performance and pedigree.”
