The prospect of reduced fees and increased control are drawing more institutional asset owners to consider building their own in-house investment teams, moving away from the long-standing model of hiring external managers. Insourcing investment management is a global trend for asset owners with the potential to generate alpha through lower fees and potentially better investment returns. But without the right operating model, those rewards might be elusive.
While news reports and research show that fee savings are real for asset owners that choose to manage assets in-house, the cost side of the ledger is more complicated. Asset owners face some tough questions: Can they handle the governance challenges that increased operational risk brings? How will they manage the added costs of running an internal operation? Do they have the right technology in place to optimize decision-making? These are all important considerations in the move to an internally managed investment model.