UK/EUROPE - Goldman Sachs Asset Management (GSAM) is going all out to capture the traditional business of consultants in launching its own asset advice service which encroaches further up the pensions management supply chain than any fund manager has before dared venture in Europe.
GSAM is to trial the service first in German and Scandinavian markets before assessing its suitability for expansion further afield. Target clients in those markets are insurance companies running pensions money, as well as business from corporate pension fund clients “where it exists” - a target market of over e1trn.
James Dilworth, head of the investment management division in Germany for GSAM, said the service would offer asset liability modelling and benchmark selection, strategic asset allocation, manager selection and ongoing risk monitoring.
Asked whether there is a conflict if GSAM is one of the managers chosen to run assets also, the firm said each client is given the chance at the outset to exclude GSAM from this opportunity.
GSAM has already experienced success with this ‘fiduciary contract’ style of management with a e880m mandate from Dutch healthcare insurance company VGZ.
Dilworth said: “Traditionally, insurance companies and pension funds have done some of this in-house and they’ve used liability consultants and asset consultants - there’s been a lot of moving parts.
“The idea is for GSAM to come in and help the insurance companies and pension funds enact every one of these steps with one partner.”
He added: “We continue to accompany the insurance company or the pension fund after implementation, we continue to monitor the risk and monitor the managers on a daily basis. As opposed to consultants we continue to be engaged on an ongoing basis once the programme has been implemented.”
GSAM admitted it felt it necessary to contact consultant firms prior to the launch of the new service to check they were happy with the idea, but maintains it has encountered no opposition from consultants so far.
Dilworth added that although asset consultants might see that GSAM is trying to infringe upon their territory, GSAM sees them as “partners as opposed to competitors in this space.”
Invesco’s annual survey of European institutional investors found that during 2002 the main reason for hiring consultants was for asset liability studies while in 2001 selecting external managers was the main reason to employ a consultant.
Jon Bailie, managing director, institutional investment services at Frank Russell, which has branched out into implemented consulting, said the lines between consulting and management were getting “fuzzier”.
Asked if some firms would resist having their consultancy work scaled back to just the actuarial, he said: “That may be an issue. It depends how it’s done.”
He denied there was a battle brewing between consultants and fund managers over their conflicting strategies, but added: “There will be some weak consultant firms and weak asset managers who won’t be able to implement such a change in strategy.”
Others, such as JPMorgan Fleming Asset Management, already offers a full range of consulting and fiduciary services in the US.
Merrill Lynch Investment Managers managing director, institutional clients Andrew Dyson said MLIM currently offers some services further up the pensions management chain but had drawn the line at - and does not offer - asset liability modelling. He said to do so would risk opposition from consultants. Deutsche has also said it would like to be involved in areas consultants traditionally focus on.
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