TAKING THE REINS

Key criteria for replacing a current external asset manager

Respondents were asked to select from a large array of criteria their reasons for replacing their current asset manager. Figure 5 demonstrates the three criteria which had been selectedmost frequently by institutional investors. Understandably, poor investment performance was the primary reason for replacing their asset manager, which correlates with it being among the top three factors when selecting an asset manager. High levels of fees/costs are seen as a key reason for replacing an asset manager; this is particularly pertinent in the current environment in which institutional investors aren’t seeing the returns they desire, and look to reduce costs elsewhere. Fees have consistently remained a concern of institutional investors, but greater emphasis is being placed upon them as a result of both parties facing rising costs in the form of regulatory requirements.

Rounding out the top three is a perceived lack in the quality of reporting. Institutional investors felt that aside from poor performance and high levels of fees, the lowquality of reporting also drove them to replace asset managers. The quality of reporting is defined as the frequency, depth and relevance with which asset managers report portfolio developments as well as any changes/updates impacting the structure of the allocated assets. In this regard institutional investors wish to receive timely and in-depth reports detailing the progress of their investments as well as explanations for any deviations.

Figure 5

Key criteria for replacing a current external asset manager

Poor investment performance

High level of Fees/Costs

Poor quality of reporting

0

10

20

30

Score based on ranking

Source: PwC-CACEIS survey 2012

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