2016年-FCA英国金融行为监管局_ms15_2_2_annex_5_65页_782kb

Summary of MS15/2.2: Annex 5 - Institutional Demand Side Market Study

Core Content

This document is part of the Market Study on the Institutional Asset Management sector, focusing on the demand side. It outlines the findings from a survey and bi-lateral discussions with institutional investors, including pension schemes, insurance firms, and charities, to assess the effectiveness of competition in the market and the ability of investors to access, assess, and act on useful information.

Main Points and Findings

1. Institutional Investors' Characteristics

• Institutional investors vary in size, experience, governance, investment objectives, and resources.
• Smaller investors face similar challenges to retail investors in terms of negotiation power and ability to secure value for money.
• The institutional demand side is fragmented, with a large number of small pension schemes having limited buyer power.
• Pension schemes are the largest institutional investor group, followed by insurance firms and charities.

2. Survey Overview

• A total of 89 institutional investors participated in the online survey, with 63 being pension schemes, 19 insurance companies, and 1 charity.
• The survey included 82 questions, with a focus on governance, investment vehicles, costs, value for money, and switching behavior.
• Free text questions allowed respondents to express their views on value for money and industry inefficiencies.

3. Survey Response Rate and Limitations

• The response rate was low (23 responses initially), which was expected due to the nature of the survey distribution.
• A second round of distribution increased the number of responses to 93, with four removed due to incomplete data.
• The survey is unweighted, meaning the results may not fully represent the broader institutional investor population.

4. Investment Vehicles and Strategies

• The most common investment vehicle was a mix of pooled and segregated funds (52%).
• Pooled funds were more commonly used by smaller investors, while segregated mandates were more prevalent among larger investors.
• On average, 57% of assets were invested in active strategies, 24% in passive strategies, and 13% in quasi-passive strategies.
• Investors with smaller assets were more likely to be 100% invested in active strategies (41%) than those with larger assets (12%).
• Fixed income was the second most popular asset class, with equity being the most popular.

5. Governance and Oversight Committees

• Oversight committees varied in size, with 22% having only two members, 39% having 3–5 members, and 35% having more than six members.
• Smaller investors had fewer members on their oversight committees.
• 31% of respondents reported that there were no specific requirements for trustees, while the rest emphasized investment experience, years of experience, and other qualifications.

6. Asset Management Costs and Value for Money

• 67% of respondents felt they were receiving good or very good value for money from their asset managers.
• 22% thought they received average value for money, and <10% felt they received poor or very poor value for money.
• Respondents generally associated value for money with outperformance against a benchmark, net of all fees, and transparency in costs.
• Asset managers often do not willingly provide cost information, and institutional investors need to push for it, especially for transaction costs.
• Opacity in the industry is a concern, particularly in areas such as fiduciary management, defined contribution pensions, hedge funds, and private equity.

7. Investment Consultant Role

• Investment consultants play a key role in helping institutional investors, especially pension schemes, make asset allocation and manager selection decisions.
• Trustees often rely heavily on investment consultants.
• Respondents generally felt they received good value for money from consultants.
• However, they found it difficult to assess the quality of consultants before appointing them.
• The quality of the relationship with consultants appears to be a key driver of whether investors switch providers.

8. Factors Influencing Asset Manager Selection

• Management fees were the most important factor for most respondents, followed by reputation.
• Past performance was also a key factor, especially for smaller investors.
• Investment consultant recommendations were more important for investors who received advice, and ranked in the top five for larger investors.
• Marketing materials and marketing pitch were rated least important (4.0 and 4.2, respectively).

9. Switching Behavior

• Institutional investors struggle to switch to alternative asset managers or consultants due to complexity, lack of expertise, and high switching costs.
• The ability to switch is influenced by the quality of information and the relationship with the current provider.

Key Information

• Confidentiality agreements were used by 22% of respondents, mostly by large schemes with over £1bn AUM.
• Smaller pension schemes are more likely to rely on consultants and use pooled funds.
• Larger investors tend to use segregated mandates and have more investment expertise on their oversight committees.
• Institutional investors are increasingly focused on costs, including consulting fees, asset management fees, and ancillary service costs.
• Compliance with the mandate, transparency, and flexibility are important for value for money.
• Fee structures, especially ad valorem fees, are criticized for leading to disproportionate fee increases with more assets.

Conclusion

The study highlights the fragmented nature of the institutional asset management market, the importance of cost transparency, and the critical role of investment consultants in decision-making. It also points to challenges in assessing value for money, switching behavior, and governance effectiveness, especially among smaller investors. These findings are essential for understanding the current state of competition and improving investor outcomes in the sector.