According to new research from quant technologies provider SigTech, 70 per cent of pension funds and other institutional investors believe demand for custom portfolio solutions will increase strongly.
According to new research (1) from quant technologies provider SigTech, 70 per cent of pension funds and other institutional investors believe demand for custom portfolio solutions will increase strongly.
The disruptive market forces of ESG, indexing and digitisation are driving this increased demand for customisation. Two thirds of those surveyed (67 per cent) believe it will become one of the biggest growth areas in asset management and is one of the industry’s most exciting developments.
Customised portfolio solutions are bespoke investment strategies that are developed to meet the specific needs of investors. One of the key reasons for growth in this market is that 75 per cent of the institutional investors surveyed said they are becoming increasingly sophisticated in their individual ESG requirements. In addition, investors are finding it difficult to find off-the-shelf products offered by fund managers that are fully aligned with their needs.
Some 41 per cent of participants said they believed fixed income was the asset class with the biggest need for customisation, followed by 27 per cent who cited commodities, 18 per cent said equities and 14 per cent mentioned hedge funds.
When it comes to implementing their individual ESG policies, the study found that institutional investors use a combination of solutions. Some 65 per cent said they use off-the-shelf products (ie without any customisation), 60 per cent use customised portfolio solutions with external partners, and 52 per cent said they develop these internally.
Daniel Leveau, who heads SigTech’s strategic initiatives for institutional investors, says: “Investing does not have to be just about searching for an existing product that offers the best possible fit to the investor’s needs. It is about creating a product that 100 per cent corresponds to the investor’s requirements. Our research shows that 69 per cent of institutional investors agree with this view.”