Home ListingJune 17, 2013

Investors Demand Better from Managers over Crisis

<em>Fund managers have the insight and the tools—investors want to feel the benefit of them.</em>

Reported by Featured Author

(June 17, 2013) — More than two-thirds of investors want their investment managers to better understand the current economic environment and help them take advantage, according to research published this week.

Some 67% of investors said asset managers must develop new investment capabilities to help them capitalise on the opportunities created by the debt dynamic, an annual survey by CREATE Research and Principal Global Investors reported.

“Asset managers need to make investors’ worlds easier,” the survey said. “Their product offerings need to embody advice mechanisms such that ‘doing-nothing’ on the part of investors is itself financially savvy.”

The report said risk has been passed from those who couldn’t manage it, to those who don’t understand it-and this is where investors need help and protection from their investment partners.

Almost two-thirds of respondents said they wanted their investment partners to “improve client engagement to better understand clients’ needs, liabilities and risk tolerances”, while just under half said asset managers “must improve the alignment of interest so they can deliver products that better fit the purpose within a value-for-money fee structure”.

A potential positive from the survey was that investors expected lower returns as a result of the current environment.

“High returns will no longer be the be-all and end-all. Investors will adopt eclectic approaches. Caution will prevail alongside opportunism,” the report said. “The chase for returns will prevail alongside the chase for other goals, for example: capital conservation, inflation protection and regular income.”

One respondent to the survey said: “Investors prefer safety at the expense of returns due to the growing worries about the stability of the global financial system.”

The report said the push towards solutions-based products would continue, with investors viewing alpha according to their own specific benchmarks, rather than general market indices. This point was true for all types of pension and retail investors, the report said.

“Latest examples include Liability Driven Investment in the defined benefit segment, life-cycle investing in the defined contrubtuion segment and advice-embedded investing in the mass market segment. A critical mass of early adopters is already there. Late adopters are not far behind.”