IAM Newsletter 17/09/21

institutional asset manager maddy taylor captioned.jpgInstitutional investors are increasingly choosing to outsource investment management to outsourced-CIOs and fiduciary managers. The total amount of delegated assets has jumped by more than 90 per cent over the past five years, spurred on by Covid and increasing governance burdens on pension trustees. 

The outsourcing trend has begun to raise concerns over potential conflicts of interest, since many fiduciary managers are also major asset managers, who are then able to use client assets to invest in their own funds. 

However, Russell Investments believes outsourcing could end up being a positive trend for boutique asset managers, with demand growing for niche strategies relating to ESG and private markets. “I think that the growth of OCIO is actually going to encourage more innovation, and that the wider asset management world should be excited, not fearful,” says Russell Investments.

The demand for sustainable investments is expected to grow considerably in the coming years, as institutional investors continue to “green” their portfolios.
Research from Global Impact Solutions Today (GIST) and Barclays Private Bank finds that the majority of the world’s wealthiest individuals, family offices, and foundations see their capital as essential in the fight against climate change.

Those that are already active in sustainable investing say it will make up an average of 47 per cent of their portfolios by 2022, and 54 per cent by 2027.

Meanwhile, asset managers are debating their future positioning in China, after a series of regulatory crackdowns on industries including fintech, private education, and property firms. Investor sentiment toward China has plummeted, with influential investors Ark Invest and Aubrey Capital Management slashing their exposure.

Willis Towers Watson believes that China’s lightning-speed programme of reforms will ultimately transform it into a more sustainable economy.

“What is happening here is that fundamentally, China is pivoting its economic philosophy from basic growth at all costs to a more inclusive and long-term sustainable model,” says Willis Towers Watson, which recommends investors follow a long-term target allocation of 20 per cent to China. 

Madeleine Taylor

Editor, Institutional Asset Manager


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