A Year in Surveys
In our surveys throughout the year, asset owners let their voices be heard on topics such as outsourcing, transition management, and LDI. As we wrap up 2017, here’s a look back at your responses, suggestions, and highlights from the results.
2017 Outsourced Chief Investment Officer Survey
The year saw larger growth for the big fish in the OCIO pond, while the smaller fish expanded in smaller quantities. Although endowments saw a rocky 2016, 74% of respondents reportedly increased the dollars spent from their endowments—an 8.1% increase from last year. Of the 148 respondents, 40% outsource or plan to outsource within the next two years, down 40% from the previous year. “Experience of top management” (93%) was the number one reason for choosing outsourcing firms. More than six in 10 outsourcing asset owners do so for 100% of their portfolios—68% in the under-$500 million category, and 100% in the $500 million to $1 billion category.
Reasons for Outsourcing
| CRITICAL | IMPORTANT | NOT VERY IMPORTANT |
NOT AT ALL IMPORTANT |
NOT APPLICABLE |
|
| Better risk management |
32% | 56% | 5% | 0% | 7% |
| Cost savings |
18% | 40% | 25% | 3% | 14% |
| Lack of internal resources |
58% | 33% | 3% | 0% | 6% |
| Additional fiduciary oversight |
43% | 38% | 8% | 3% | 8% |
| Need to increase returns |
28% | 46% | 13% | 5% | 8% |
| Faster implementation/ decisions |
20% | 43% | 23% | 8% | 6% |
| Desire for strategic partnership |
23% | 33% | 23% | 13% | 8% |
2017 Transition Management Survey
Our sixth annual Transition Management survey saw 57% of respondents perform more transactions, as well as increase the number of transitions for the year by 5%.
Of the 234 respondents, 75% reported they “completely trust the industry,” up from 59% in 2016. Participating organizations conducted an average of 6.4 transactions (including legacy and target). At 55%, “manager performance” was again the main reason transitions were conducted, down 1% from 2016. In addition, 58% of respondents did not use consultants to advise them in the transitions—a 1% increase from the previous year. Most respondents (32%) also noted that two transition managers are usually considered for each transaction. In terms of benchmarks used to gauge transition costs, implementation shortfall increased by 12% at 80%. In 2017, 90% of respondents reported they “always” require a transition management agreement to govern the transitions, up 12% from last year. The leading security transitioned was again US equities, which stayed flat at 84%.
What was the reason for conducting your transition(s)?
| 2016 | 2017 | 1-Yr Change | 6-Yr Change | ||
|---|---|---|---|---|---|
| Manager Performance | 55 | 54 | -2 | 9 | |
| Change in manager personnel/ structure |
27 | 30 | 10 | 28 | |
| Asset allocation shift | 35 | 38 | 8 | -37 | |
| Rebalance | 22 | 28 | 30 | 4 | |
| Restructure of your fund | 29 | 42 | 43 | 9 | |
| Change in fund/manager benchmark | 10 | 5 | -48 | -64 | |
| Cash flow, in or out | 11 | 21 | 84 | 120 | |
| Other | 5 | 15 | 182 | 79 |
2017 Liability Driven Investment Survey
The trend of pension risk-transfers and freezes continued in 2017, leading to 64% of respondents with an endgame to manage/de-risk their plans, up 6% from 2016. Endgames offering lump sums were at 35%, while 32% of respondents said buyouts were the endgames for their plans. The goal to keep plans open improved by 9% to 25%, and pension freezes went down 2% from 2016. On average, 2017 respondents have 52% of their portfolio in LDI strategies, up 5% from 2016.
Current Plan Status
| OPEN TO NEW ENTRANTS AND ACCRUALS |
FROZEN | CLOSED TO NEW ENTRANTS, STILL ACCRUING |
|
| ALL 2017 RESPONDENTS | 28% | 38% | 34% |
| >$15B | 28% | 38% | 34% |
| $5B – $15B | 30% | 19% | 51% |
| $1B – $5B | 28% | 52% | 20% |
| $500M – $1B | 17% | 42% | 42% |
| <$500M | 36% | 43% | 21% |
