Investment Consultant Shake-Up Coming
"British Airways has a Jumbo jet simulator, and landing it is exciting and dramatic. But think of being in a real Jumbo, with the pilot slumped dead beside you. That's the real element of life and death. That's what you get in business."
Adam Faith, former pop singer and businessman
The investment consultancy business model may be ripe for change. For a long time the so called big names of Mercer, Cambridge Associates, Callan, Frank Russell etc. provided advice and fund selection in the traditional space.
Some of them even stepped into the product creation space (Frank Russell) where they can get paid basis points on assets raised or performance produced, in much the same way as a fund of funds.
Then hedge funds and other complex alternative investments came along and their work became more complicated. It also meant that they needed to keep tabs on more managers in areas of the market that many of their employees had no experience. They became the first line of defense - the box checkers - for the institutional investors.
Today, news has leaked that a previously staid and steady database and ranker of mutual and hedge fund products has stepped into the investment consultant world. Morningstar has apparently replaced Mercer (Singapore) as the investment consultant for the pension fund of Singapore. If true, this would be a significant coup as well as a blow to the oligopoly of established players.
Although one might speculate on the specifics of the arrangement this is a clear indication that similar firms might consider a business model that represents large institutional clients and their interests. This is in contrast to the S&P, Moodys and Fitch rating business whose sad claim to fame is that they tend to be incentivized by the funds and banks that create asset-gathering structured products.This is a fundamental difference and may signal a change that will eventually be followed by the previously mentioned firms.
Is there a front-runner in this business, maybe not. Although a firm like Albourne Partners which is affiliated with the community website has made impressive gains with a number of institutional investors in the U.S. and Europe. Last year they also stepped up their activities covering hedge funds in Japan, presumably before chasing down institutional investors in that part of the world too. Mahalo.
"British Airways has a Jumbo jet simulator, and landing it is exciting and dramatic. But think of being in a real Jumbo, with the pilot slumped dead beside you. That's the real element of life and death. That's what you get in business."
Adam Faith, former pop singer and businessman
The investment consultancy business model may be ripe for change. For a long time the so called big names of Mercer, Cambridge Associates, Callan, Frank Russell etc. provided advice and fund selection in the traditional space.
Some of them even stepped into the product creation space (Frank Russell) where they can get paid basis points on assets raised or performance produced, in much the same way as a fund of funds.
Then hedge funds and other complex alternative investments came along and their work became more complicated. It also meant that they needed to keep tabs on more managers in areas of the market that many of their employees had no experience. They became the first line of defense - the box checkers - for the institutional investors.
Today, news has leaked that a previously staid and steady database and ranker of mutual and hedge fund products has stepped into the investment consultant world. Morningstar has apparently replaced Mercer (Singapore) as the investment consultant for the pension fund of Singapore. If true, this would be a significant coup as well as a blow to the oligopoly of established players.
Although one might speculate on the specifics of the arrangement this is a clear indication that similar firms might consider a business model that represents large institutional clients and their interests. This is in contrast to the S&P, Moodys and Fitch rating business whose sad claim to fame is that they tend to be incentivized by the funds and banks that create asset-gathering structured products.This is a fundamental difference and may signal a change that will eventually be followed by the previously mentioned firms.
Is there a front-runner in this business, maybe not. Although a firm like Albourne Partners which is affiliated with the community website has made impressive gains with a number of institutional investors in the U.S. and Europe. Last year they also stepped up their activities covering hedge funds in Japan, presumably before chasing down institutional investors in that part of the world too. Mahalo.
posted by Franklin Scruggins | 6:38 AM
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