TAKING THE REINS

Deliver continuing value

From here the team must continue to satisfy expectations by upholding their expertise and the quality of advice they deliver, as well as identifying areas in which added value can be attributed. “They shouldknowour needs andour regulatory requirements.” Recommendation from a Finnish pension fund Although institutional investors indicated that they were satisfied with the independent verification, operational strength, expertise and quality of advice of asset managers; this doesn’t by any means entail that they are of less significance. In an environment in which new assets are difficult to both obtain and retain, the size of assets institutional investors hold is essential to the health of asset managers; thereforemaintaining and increasing the satisfaction of institutions is as important as meeting the deficit in expectations. Asset managers must look in the short term to retaining the features that satisfy institutional investors; maintaining these factors is essential to upholding the trust institutional investors place in them, while allowing asset managers to look into the longer term to correct areas in which satisfaction is not met. The impending regulatory environment further compounds the problems asset managers face as both their operations and that of institutional investors stand to be altered significantly should they pass into law.

Success can only be achieved when amanager is able to deliver consistent risk-based performance and to charge a level of fees which is commensurate with it while demonstrating utmost transparency.

Risk-based performance over fees

Risk-based performance over fees describes the need for a more indicative fee structuringmodel that satisfies institutional investors’ demands for fees correlated to the performance of their investment. Institutional investors felt that they were paying over the odds for management of their assets and received no compensation for poor performance or size of assets that they allocated. Therefore a stronger correlation between the two should help justify the fee levels and incentivise asset managers to achieve optimum returns. “Asset managers must overperform on a more regular basis.” Recommendation from a French pension fund

Transparency

Transparency was a running theme throughout the report, featuring in areas in which satisfaction is not being met as well as part of the regulatory requirements that institutional investors and asset managers face.

“Be fully transparent.” Recommendation from a Swiss pension fund

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