TAKING THE REINS

Figure 16

Main reasons for using external asset managers

In stark contrast, insurance companies greatly prefer regulated funds, accounting for three quarters of their assets. Investment funds have benefited from the growth of the unit-linked insurance market. Insurance companies also have a minimal amount in offshore funds (1%). The reason for whichmay be due to the insurers’ need to mitigate their risk to a greater extent, and pension funds having a longer investment time frame. The difference between institutional investors in terms of size also impacts their investment behaviour; with smaller investors opting for a predominantly regulated fund structure (47%), and larger investors using mandates (57%). The allocation to offshore funds by smaller investors is double that of large investors, an indication of the greater amounts of freedom enjoyed by smaller investors. With institutional investors looking for higher returns in such an investment environment, they will most probably have to diversify beyond their traditional local fixed income investments into areas (regions and asset classes) they are not familiar with. This may impact their use of external asset managers. As part of the survey, institutional investors were asked to give their reasons for using external asset managers. The main reasons listed (figure 16) highlight the necessity for institutional investors of using asset managers as they seek to optimise their investments through utilising the expertise of asset managers. Use of external asset managers

Lack of internal resources/expertise

7.5

Improved performance

7.0

Access to additional asset classes

6.3

5

6

7

8

Ranking

Source: PwC-CACEIS survey 2012

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