GLOBAL - Pension funds' attitudes as to who should intermediate their investment advice have fragmented, with funds showing a strong bias towards independent consultants according to a Global Pensions survey. The Global Pensions 100 Panel was asked which business model provided the best investment advice.
In-house advice was the referred method of 16% of the panel. Asset managers (12%) and investment banks (5%) between them convinced 17% of respondents that they were best placed to offer investment advice.
However, the biggest surprise from trustees was the growth in popularity of independent consultants, who bagged 42% of the votes. Global consultancy firms lagged behind with only 25%.
Amin Rajan, chief executive of finance research company CREATE, said the survey’s findings showed independent consultants offered the most attractive model because they had a closer alignment of interest with their clients and were least open to conflicts of interest.
He said: “There are exceptional pockets of expertise in every one of these models, to the extent that, in future, no single channel will dominate the advice market, as has been the case in the past.”
Rajan went on to say the fragmentation in the intermediary market reflected the continuing changes in the value chain of asset management, as it became ‘more atomised’ in search of out-performance.
Roger Urwin, global head of investment consulting at Watson Wyatt, said: “It is not surprising that a high percentage of pension funds around the world prize independent investment advice. This survey is a reminder that staying with a trusted adviser with an independent stance should remain a high priority.”
Howard Yata, managing director, Wilshire Consulting, defended global
consultants saying they offered larger plans the potential of broadening their scope of investment alternatives beyond the nationalistic reach.
Todd Ruppert, president and CEO of T. Rowe Price, said: “From our experience some clients believe asset managers and investment banks have more experience executing the less traditional transactions and strategies.” However, he did concede that plan sponsors often valued the independence of consultants.
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