Institutional demand for investment outsourcing is accelerating, even as a lack of consensus on best practices in the fast-growing, crowded market segment makes it hard to predict who the winners of an eventual industry shakeout will be.
For now, corporate defined benefit plans, endowments, foundations and other institutions seeking firms to assume discretionary oversight over some or all of their portfolios can find one-size-fits-all, as well as customized, approaches and a variety of fee structures, architecture models and levels of service and partnership.
Investment outsourcing remains “all over the place, (with) different models, pricing schemes, delivery systems and value propositions,” making the task of sifting through it all “a bit paralyzing,” said Kevin P. Quirk, partner with money manager consultant Casey Quirk LLC, Darien, Conn.
The market should eventually coalesce around more widely accepted standards as it moves from one where suppliers lead the way to one where consumers call the shots, predicted Mr. Quirk, who pointed to the growing number of outsourcing RFPs over the past 18 months as a step in that direction.
Others say investment outsourcing appears to have crossed the threshold from niche to mainstream service during the past year.
“The education process is pretty much done. By and large, the industry is now very, very familiar with the concept,” resulting in talks with more institutional investors and some larger ones to boot, noted Thomas Murphy, a senior partner and U.S. head of fiduciary management with Mercer in Boston.
Christopher L. Bittman, a Denver-based partner with Perella Weinberg Partners and chief investment officer of the firm's Agility investment outsourcing business, agreed: “Demand is increasing materially,” as boards realize that “giving up discretion doesn't mean giving up involvement in the process,” he said.