Customization, ESG Are Opportunities for Investment Consultants

Growth in 2014 for U.S.-owned institutional assets was down from 2013, but demand for custom solutions is a significant area for ongoing growth, Cerulli finds.

Institutional assets in the U.S. grew by about 6% in 2014, according to Cerulli Associates, compared with 9.8% growth in the previous year.

Chris Mason, research analyst at Cerulli, observes that institutional assets experienced more modest growth primarily because of more modest growth in the equity markets. However, the lower overall growth masked substantially stronger increases in several institutional channels, Mason observes, which taken separately saw growth closer to 2014 levels.

Matching years of industry commentary and predictions, Cerulli finds an ongoing area of significant growth was based in the growing demand by institutional investors for more customized investment solutions. Mason highlights findings that show custom solutions assets have more than doubled since 2010, from about $500 billion to more than $1 trillion last year.

“Cerulli’s projections show increasing demand for custom solutions in the next five years from corporate pension plans, public plans, and non-profits,” he adds, also highlighting strong opportunity for asset managers and investment consultants that focus on environmental, social, and governance (ESG) factors. This group has benefitted from increased demand as different stakeholders place more pressure on investment committees to consider such factors in their investment decisionmaking process, Mason says, especially in the wake of the Department of Labor’s easing of plan sponsor fiduciary concerns related to ESG investing programs.  

According to Cerulli research created in partnership with The Forum for Sustainable and Responsible Investment (US SIF), 64% of responding asset managers indicated that they believe it will be “very important” for managers to offer ESG capabilities in the next 2 to 3 years, simply in order to compete in the marketplace.

More information about obtaining Cerulli reports, including Institutional Markets 2015: Organizing to Capture Asset Growth Opportunities Across Institutional Channels,” is available here