Executives of tax-exempt funds consider investment consultants vitally important to the success of their funds, results of a Pensions & Investments Research Advisory Panel survey show.
Forty percent of respondents — executives at defined benefit plans, defined contribution plans, foundations and endowments — found investment consultants to be “very important” to the operation and success of their retirement plans, foundations or endowments. A total of 23% believe the investment consultant's role to be “crucial,” while 26% found consultants “somewhat important” and 4% “not important.” The remainder did not have a relationship with a consultant.
Asked where investment consultants add the most value to their organizations, 27% said asset allocation development and another 27% said money manager search/selection. Performance measurement/reporting was most valuable to 23% of respondents, with money manager monitoring at 10%.
When asked where consultants added the least value, 27% said in money manager monitoring, while 25% said asset allocation development. Performance measurement/reporting was next at 24%, followed by money manager search/selection at 11%.
The vast majority of respondents are satisfied with their current consultant fees, with 86% saying they are not considering elimination of any consultant relationship in the next 12 months to save costs. Only 2% of respondents are considering that step to save costs.
Most respondents without specialty consultants for alternative asset classes do not plan to hire one in the next year. Of 80 respondents without a specialty consultant, 89% said no specialty consultant will be hired, while 9% plan to hire a private equity consultant, 6% plan to hire a hedge fund consultant, 3% plan to hire a real estate consultant and 1% plans to hire an infrastructure consultant.
Some respondents plan to hire more than one specialty consultant.
The vast majority of respondents believe investment consultants should have fiduciary responsibility, while less actually have consultants with that responsibility. While 92% believe investment consultants should have fiduciary responsibility, when asked whether their current consultants have that responsibility, only 79% said they did.
The survey, conducted earlier in November, was sent to executives at more than 300 investment funds. Of the 141 total respondents, 89% offer a defined contribution plan, 65% offer a defined benefit plan, and 9%, a hybrid plan; 1% do not offer any of those funds.