The world's largest money managers are in hot pursuit of the industry's holy grail: the capability to provide an end-to-end investment solution for investors.
Managers are pouring substantial resources into restructuring, beefing up and modernizing their investment solutions business units to meet what they believe will be huge demand from a wide range of investors.
Among megamanagers making a priority to develop a seamless path from investment-only multiasset-class strategies to customized investment outsourcing approaches are BlackRock Inc., Goldman Sachs Asset Management, Morgan Stanley Investment Management, Northern Trust Asset Management, State Street Global Advisors and The Vanguard Group Inc.
At stake are trillions of dollars from investors, ranging from the largest defined benefit plans and sovereign wealth funds to individual savers seeking solutions-based investment strategies, said Justin White, principal at money manager adviser Casey Quirk, a practice of Deloitte Consulting LLP, Darien, Conn.
Total assets managed in multiasset-class strategies totaled $4.75 trillion as of March 31, data from eVestment Alliance LLC showed.
Outsourced assets managed for worldwide institutional investors were $2.09 trillion as of March 31, data from Pensions & Investments' recent survey of outsourcing managers showed.
Annual growth of the combined multiasset-class strategies and OCIO business over the next five years will be between 8% and 9%, according to a CQA estimate.
If the forecast is accurate, even at the low end of the estimate, managers will be vying for at least $2 trillion of new multiasset and OCIO inflows between now and the end of 2023.
"The intersection between multiasset-class strategies and outsourcing is the battleground for the industry going forward," said CQA's Mr. White, stressing the largest money managers recognize they must build full capabilities in both areas to meet client demand.
"Outsourcing is the broadest part of the advice and solutions spectrum. The question for the end investor is 'who can help me meet my objectives? Will a multiasset-class strategy suffice or do I need a full outsourced solution?'" he said.
And money managers are in serious building mode.