Portfolio Challenges Lead to New Mandates

April 26, 2013 ( – Asset managers and consultants are transforming portfolio construction challenges into new mandates, according to Cerulli Associates.

By PLANSPONSOR staff | April 26, 2013

The second quarter issue of The Cerulli Edge: Institutional Edition found that institutional investors and investment consultants are augmenting their traditional asset allocations with risk-factor-based approaches to portfolio construction. Cerulli reports that in order to address their clients’ needs, institutional managers are reshaping their capabilities with a greater emphasis on product solutions for specific challenges, such as inflation or currency risk, as opposed to investment strategies.  

“Nearly 44% of managers we surveyed are focused on risk management products and services, and more than 30% of managers are focused on developing overlays, including tactical and currency,” said Cindy Zarker, director at Cerulli Associates.

Since the financial crisis of 2008, Zarker said, institutional investors have become more concerned about the liquidity of vehicles, emphasizing the ability to quickly shift in or out of investment vehicles or strategies. Outsourced chief investment officer providers who can rapidly enact tactical allocation changes during extreme market events promote that skill as a competitive advantage.

“The quality of investment performance and client servicing models are only a starting point for asset managers trying to secure new mandates and retain existing mandates with institutional investors,” said Zarker. “Disruptive market events provoke fresh thinking about asset allocation, paving the way for new product solutions.”