Institutional investors are turning to boutique investment consultants to help them find investment outsourcers as more established consulting firms have set up their own outsourcing businesses in recent years.
As traditional consultants have gotten into the discretionary outsourcing business, they've “effectively taken themselves out of a possible role running the RFP process” for institutional clients seeking outsourced CIO providers, noted Richard Nuzum, a New York-based senior partner with Mercer and head of the firm's investment business in the U.S.
That trend has coincided with a pickup in demand for outsourcing in recent years, resulting in a growing bias toward small consultants, including owner-operated, single-principal shops, said Mr. Nuzum, adding that Mercer has previously observed the same pattern in other markets such as Australia.
Last month, Rocaton Investment Advisors became the latest established investment consultant to launch an outsourced CIO business, joining heavyweights such as Mercer, Russell Investments, Towers Watson & Co., Cambridge Associates LLC and Hewitt EnnisKnupp.
NEPC, another holdout, joined the fray last year. A number of smaller competitors — including Angeles Investment Advisors, Marco Consulting Group, Wurts & Associates, Fund Evaluation Group and Segal Rogerscasey — are all in the game as well.
That expanding list has benefited the dwindling number of established consultants that has stubbornly stuck to traditional consulting.
Brian C. Ternoey, a principal with one such firm, Pennington, N.J.-based Curcio Webb, said his firm has helped roughly 15 clients think through whether to outsource investment oversight of their portfolios in the past three years, and demand for that service is “definitely increasing.”
But a growing number of institutional investors are turning to less well-known names for an independent view, including White Oak Advisors, Indianapolis; New England Retirement Consultants LLC, Boston; Botanica Capital Partners LLC, New York; and Tejera & Associates, Bainbridge Isle, Wash.