The third annual U.S. Institutional Investor Brandscape report found that pensions, endowments and foundations are utilizing the leading broad managers for just 40% of their institutional assets, down from 45% in 2011. These investors are now directing the majority of assets to specialized managers, other broad managers or single manager hedge funds.
While this pattern of behavior is noticeable among pensions, the contrast is even more dramatic when isolating the nonprofit institutions. Today, endowments and foundations report utilizing the leading broad managers for less than one-third (32%) of their assets, down from 40% one year ago, choosing instead to direct 54% of their assets to smaller, lesser known managers with specific areas of expertise.
Pensions represent a smaller and shrinking proportion of the total number of institutions—just 43% of the market today compared with 48% in 2010. Endowments, foundations and other 501(c)(3) tax-exempt organizations collectively represent the majority (57%) of institutional investors and will have a greater influence on the future direction of the market as a result.
“The driving force behind institutions looking beyond the leading broad managers is tied to a lack of confidence in these firms’ capabilities in the asset classes that are of interest to investors today,” explained Christy White, principal of Cogent Research.
“The 41 leading asset managers we track in our study face a formidable challenge in their attempt to grow their businesses as fewer and fewer mandates are being directed their way,” said Linda York, practice director of Syndicated Research and author of the study.
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