Investment consultants say a year of gut-wrenching twists and turns didn't kill them - it made them stronger.
While consultants had to work overtime addressing the ripple effects of the market's collapse on areas such as securities lending, hedge funds and private equity investments, at the end of the day a number of firms reported growing demand from institutional investors for help in managing their portfolios.
“There are a lot of tired consultants running around, but business-wise, it's been fine. We've been growing,” said Julia Bonafede, senior managing director and head of consulting with Santa Monica, Calif.-based Wilshire Associates Inc.
Mercer Investment Consulting, whose $3.7 trillion in global institutional advisory assets for the year ended June 30 topped the charts in Pensions & Investments' latest survey of investment consultants, likewise enjoyed solid demand for its services, with the firm's president, Jeffery J. Schutes, reporting “strong double-digit growth in revenues.”
With its focus on risk mitigation and managing client assets and liabilities in a holistic way, “it's been a very good year for investment consulting” at Chicago-based Mercer, Mr. Schutes said in an interview.
Exciting times have translated into “unprecedented demand for our services,” agreed Bradley S. Smith, CEO of Lincolnshire, Ill.-based Hewitt Investment Group LLC, which ranked sixth in institutional advisory assets.
Several consulting veterans reported seeing little evidence of clients taking their advisers to task for not anticipating the market's systemic collapse or better positioning their portfolios to withstand the fallout.
Others, however, noted that the number of searches launched this year by institutional investors for consulting services has been the highest in recent memory — a possible sign that clients are under pressure to blame someone for the damage their portfolios sustained, said Dev Clifford, a consultant with Stamford, Conn.-based money manager consultant Greenwich Associates LLC.
This period is likely to be marked by “a lot of rotation in the industry,” with plenty of new relationships being formed, said Bryan R. Decker, managing director and chief investment strategist with 15th ranked Norwalk, Conn.-based Evaluation Associates LLC.
Data on public funds compiled by strategic consulting firm Eager, Davis & Holmes LLC, Louisville, Ky., showed 103 searches for consulting services during the first six months of 2009, although only a fraction involved clients looking to replace incumbent consultants.
The Eager, Davis & Holmes data showed Mercer garnering the most mandates, with nine wins, followed by ninth-ranked R.V. Kuhns and Associates Inc., Portland, Oregon, and fifth-ranked Ennis Knupp & Associates Inc., Chicago, with eight each.
Of the subset of 17 searches whose stated purpose was to replace an incumbent, no single firm either won or lost more than two clients.