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Institutional investors looking beyond performance in selecting asset managers

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According to Cogent Research, gaining assets from institutional investors is no longer a performance-only game. Other variables, including subjective attributes like reputation, and even practical attributes like fees charged are critical to institutional investors when selecting an asset manager.

These and other findings are included in a new report, Institutional Investor Brandscape, recently published by Cogent Research. The report which examines the attitudes and behaviors of senior-level institutional professionals is based on a survey among a representative sample of 590 institutions with a minimum of USD20 million in assets.

When asked to rate the importance of thirteen separate variables impacting the decision of whether or not to work with a specific asset manager, attributes tied to returns fall in the top tier. These include factors such as investment philosophy, investment performance, investment team, and risk management practices. However, organisational stability, which can relate both to concrete metrics, as well as subjective perceptions of the brand, tops the list at 88%. Making up the second tier of attributes are a set of factors that fall squarely within the realm of brand perceptions, including brand reputation, recommendations from trusted advisors, and thought-leadership.

“Performance has become table stakes,” says Christy White, Principal of Cogent Research. “Brand is how asset managers can differentiate themselves, not only so they can get a seat at an increasingly crowded table, but to limit their losses when performance or service-related issues arise."

Also included in the Tier 2 consideration factors are fees/fee structure, a clear indication that even institutional investors can be price sensitive in the days of lower overall returns. By contrast, very few institutional investors consider third-party external ratings or product innovation as important criteria when choosing an asset manager.

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