Asset owners have been largely satisfied with their asset managers over the past 12 months but cost is a significant concern, a perception audit reveals.
The research - conducted by JPES Partners among the senior decision makers at the 26 largest UK asset owners, representing over £2trn of assets - found some 69% voiced their dissatisfaction about the value for money they receive from their asset managers.
This theme was consistent across both institutional and wholesale channels, with 62% of institutional asset owners and 80% of wholesale and wealth management audiences unhappy with the value for money their managers are perceived to have delivered.
JPES Partners' interviews with asset owners also revealed a varying degree of satisfaction with the way in which asset managers articulate their investment strategy - with some 38% of institutional investors expressing dissatisfaction.
Some 35% of overall respondents also express concerns over the way risk has been managed in the last 12 months - with the research attributing this to factors including a greater focus on risk attribution and an increased awareness of climate change and other potential sources of risk.
The research also looked at working arrangements - finding that while home working and virtual meetings have proven to be largely successful, there is a strong desire among asset owners for a return to aspects of in-person interaction, both as part of manager selection processes or ongoing client servicing.
Finally, despite an increased focus on social and governance during the Covid-19 pandemic, the study found there has been a strong ricochet back towards environmental concerns, with all asset owners surveyed highlighting this as the most important ESG priority.
Only a minority (42%), however, are satisfied with how their asset managers are addressing ESG issues with the quality of client reporting a major concern.
Satisfaction levels of asset owners towards the asset managers they employ over the last 12 months
Source: JPES Partners
Commenting on the findings, JPES Partners managing director and founder Julian Samways said: "While benign markets have helped asset managers navigate the pandemic relatively well, there are new challenges ahead if they to meet asset owners' expectations and grow their business. Clear articulation of the merits of investment approaches and improved reporting frameworks in the area of ESG, particularly in relation to the environment, will be vital to highlight where portfolios currently stand, and where future progress will be made to meet the overall investment goals of clients."
Overall, the study found that maximising risk budgets, improving portfolio diversification and managing risk effectively are the top priorities for asset owners over the next one to three years, with investors showing strong appetite for more specialist asset classes and solutions to meet their long-term goals.
Perhaps not surprisingly given the discussion about ESG and private markets over the past few years, these are some of the key areas in which asset owners expect to allocate over the coming three years.
Asset owner allocation expectations over the next one to three years
Source: JPES Partners
The research also looked at manager selection, noting that practical difficulties arising from the pandemic had not prevented asset owners from continuing to undertake manager selection processes, with nearly three-quarters (69%) doing so over the last 18 months.
Notably, it said the decision to do so was principally motivated by a desire to evolve existing asset allocations (94%), while issues relating to ESG and stewardship (50%) also scored highly.
Reasons for undertaking a manager selection process over the last 18 months
Source: JPES Partners
