UK - Watson Wyatt has been forced to turn to US-based fund managers to run 10-year mandates because their UK counterparts lack the skills to run them.
Last September, the firm revealed it had six clients that were poised to allocate up to £100m each in the mandates. It also said that while it had identified suitable UK and US equity managers to run the mandates, global equity managers lacked the necessary mindset to run them.
Instead of only seeking the best investment opportunities, the consultant found that global equity managers constructed portfolios by bolting together various regional funds.
Watson Wyatt global head of investment practice Roger Urwin (pictured) said that since then, the consultant has made progress with its search for suitable global equity candidates and that seven of its clients have made a combined total of 11 allocations to the mandates.
However, he added that the global equity candidates Watson Wyatt had found are based primarily in North America and that they were in the private clients’ department of fund managers – not the institutional or retail divisions.
Urwin explained: “Our manager research team has been quite active in different research discussions and indeed, most of the mandates have gone to the North American headquarters of fund managers, rather than British firms.
“The firms that we have found most suited to this often have this style in operation in the high net worth area.
“It has also been the case that the UK managers have a style of doing things where they very quickly go to the investment benchmark. And very few have experience of managing portfolios on absolute return grounds.”
Watson Wyatt is not the only consultant having difficulties with finding suitable fund managers for its long-term briefs.
Hewitt Bacon & Woodrow last year held a competition for the industry to devise 20-year mandates. Head of quantitative investment research Sally Bridgeland said it was having trouble with the fund managers’ “skills gap”, such as their lack of strategic asset allocation expertise, as well as setting appropriate fees and rewards.
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