U.K. multiasset managers have set their sights on the U.S. institutional market, drawing on the success of diversified growth fund strategies that have gained rapid popularity among British investors.
Managers know it's never easy for “outsiders” to win assets from U.S. institutional clients, and executives at U.K. firms cite a litany of impediments.
“The competition is very strong here,” said Philip R. Nelson, research consultant at NEPC LLC, Boston. In recent years, U.S. newcomers have joined stalwarts such as PanAgora Asset Management Inc., Pacific Investment Management Co. LLC and Grantham, Mayo, Van Otterloo & Co. LLC in offering multiasset strategies that use diversification and dynamic asset allocation to boost returns and dampen volatility.
“The universe has gotten much more robust in the last five to seven years,” Mr. Nelson said.
The good news for British managers is that it appears they have the wind at their backs.
The diversified growth fund universe — a subsection of the multiasset universe that includes risk parity, global tactical asset allocation and global macro hedge funds — has seen rapid growth in recent years. According to eVestment Alliance, Marietta, Ga., diversified growth fund assets globally hit $51.1 billion on June 30, up from $13.8 billion three years earlier. The data provider estimates about 75% of the increase came from net inflows.
The wider multiasset universe grew to $434.7 billion as of June 30, up from $182.1 billion three years prior. Growth in assets was helped by net inflows of $109 billion over the period, according to eVestment Alliance.
In July, the $239.3 billion California Public Employees' Retirement System, Sacramento, named Standard Life Investments as one of four finalists in a search for multiasset managers that share up to $2 billion. And in August, the £1.2 billion ($1.94 billion) Cornwall County Council Pension Fund, Truro, England, began searching for at least one diversified growth fund manager to run up to £140 million.
U.K. corporate defined contribution plans also are using the strategy. In an annual survey of FTSE 100 companies in May, consultant Towers Watson & Co. found that 70 of the 100 largest U.K. public companies offer a diversified growth fund as an investment option, up from 43 plans a year prior.
Still, U.K. multiasset managers are cautious when it comes to the U.S. market, citing concerns ranging from regulatory to operational to cultural as to why their strategies might not grow as quickly in the U.S. as in the U.K.