FRC Predicts Growth in the Use of External Managers
November 30, 2009 (PLANSPONSOR.com) – Based on a new study, Financial Research Corporation predicts that if the market remains stable and does not go through another crisis within the next five years, sub-advised mutual fund and variable annuity assets will grow to $2 trillion by 2014, up from $1 trillion at the end of 2008.
According to a press release, the study titled “Building a
Better Sub‐Advisory Business: Hiring, Retaining, & Firing in a
Changing Market” finds that fund manufacturers continue to consider product
performance to be the primary factor in deciding whether to hire,
retain, or fire external managers on a fund. However, other factors such as the
stability of the sub‐advisory firm, the track record of the portfolio
manager, and the quality of the risk management have become more important to
the evaluation process since the credit crisis, FRC said.
All of the fund manufacturers surveyed by FRC anticipate
merging or liquidating funds in 2009‐2010. While this will reduce the
number of existing funds, the press release said, new domestic and
international funds in a variety of asset classes will be rolled out to replace
those being merged away, creating a new product landscape in 2010.
The study report provides a view of how investment
managers have responded to the credit crisis. In the report, FRC reveals product
changes and strategic initiatives investment managers plan to take over the
next year.
The report also highlights ways for sponsor firms to
manage their external relationships to drive better business results, according
to the announcement.