This number represents an 11% compound annual growth rate (CAGR) from 2011 through 2016.
FRC says sub-advised mutual funds seem to have reached market maturity in percentage of assets that are sub-advised. But there is more growth on the way for sub-advised variable annuities (VA) as they take more share of the industry.
Demand for external managers, as measured by mandate changes, was high in 2010 and has declined as expected in 2011, particularly in the VA marketplace. FRC expects further declines in manager changes over the next year if the market remains volatile.
Sub-advisers will continue to face an opaque market when it comes to finding opportunity, but smaller firms should not feel disadvantaged, FRC said. The playing field seems more level than previously thought.
Late 2011 and 2012 will bring increased competition for fewer mandates, performance pressure escalation, and broader stock market challenges.
FRC’s recent report Winning in the Sub-Advisory Business reveals that sub-adviser firms polled say their primary source of manager search information is the manager itself (see “Report Reveals Sources for Sub-Adviser Opportunities“).