(October 8, 2012) — Investment consulting firm Towers Watson has become one of the largest institutional hedge fund investors in Europe through its fiduciary or outsourced investment platform.
The consultant invests just over $7 billion on behalf of its clients, which makes up more than 12.5% of its $56 billion in assets under “delegated responsibility”, it announced this week.
Most of the largest pension funds in the UK have relatively small allocations to hedge funds and only the giant continental European funds have substantial holdings in the sector – most of which are invested directly, rather than using a third-party manager or fund of funds structure.
The announcement came as Towers Watson revealed another mandate for its delegated investing programme. The consultant has said it will extend the relationship it has with the £1.5 billion Wallis Pension Scheme, to run €100 million across a range of hedge fund strategies.
Chris Ford, EMEA head of investment at Towers Watson, said the company had seen a trend in the number of institutional investors using fiduciary management or investment outsourcing.
Earlier this year, commenting on another mandate win for the firm, Ford said investors of all sizes were coming around to the idea of delegating at least some level of asset allocation and strategy.
This approach, followed by many investment consultants, sits in direct competition with the services provided by asset managers. This has led to a turf war and fund houses setting up their own take on consulting services in the shape of multi-asset and other options that estimate and align liabilities with investments. Asset managers, unlike most investment consultants, use a range of hedge and other alternative funds to allocate capital.
A survey by Russell Investments in June, found over two thirds of pension fund investors thought the perceived reduction in control over portfolio decisions was a barrier to them using a fiduciary manager or other providers of delegated services.
In February, a survey by aiCIO found only half of all investors who outsourced investment decisions to a third party manager were very happy with the service and performance they received.
For the full aiCIO survey, click here.