(February 15, 2012) — The level of assets outsourced to one sole third party to invest is set to double in the United States over the next five years but the number of providers will shrink to a core group, research has predicted.
A new study from consultants Casey Quirk has predicted that the $256 billion in assets under management that were invested by just one company on the owner’s behalf at the end of 2011 would rise by an annual 14% to reach $500 billion by the end of 2016.
The study said that in addition to the traditional US institutional market, which included defined benefit pension funds and not-for-profits institutions, there would be opportunities for investment outsourcing firms across the high net worth, defined contribution, and global institutional markets.
However, the study warned that the number of firms that would last the test of time would shrink. It said that those who aimed for longevity in the market had to start targeting clients and shaping their business model for the future now.
Kevin Quirk, Co-founder and Partner of Casey Quirk, said: “Winning market share today is essential as client relationships tend to last eight years and longer.”
Casey Quirk found that from now on, mandates would be won by ‘best in class’ performers and there would be a ‘market grab’ phenomenon by the most successful companies that would lead to consolidation in the sector.
Quirk said: “By 2015, we expect no more than five to 10 firms will have locked up the vast majority of the market, with remaining players forced to operate as niche boutiques or exit the business. Leading firms will build clear and specific sales and marketing strategies now and support them with adequate resources.’’
The survey predicted that mandates would be won and relationships retained by the resources and techniques offered by investment companies.
The results of aiCIO’s global investment outsourcing survey will be released later this month.