The Savvy Investor Investment Consultants section provides pensions, endowment and charity trustees with the top white papers and articles on outsourced investment management, fiduciary management and OCIO delegation.
Investment consultants offer investment research and advice to trustees, whether for pension schemes, endowments, charities, foundations, or family offices, in response to the increased need for more bespoke, advisory and discretionary, investment management services...
In exchange for a fee (typically a percentage of a client’s portfolio value), an investment consultant performs a variety of tasks such as detailed analysis on potential funds, performance analyses of fund managers and their investment processes as well as tracking a fund’s portfolio and staff turnover.
Investment consultants also advise their clients on improving portfolio returns through alpha generation and improved management of investment risk. By tracking these metrics and others, investment consultants provide trustees with a comprehensive service of actionable market intelligence on the latest institutional investment trends.
Known as the ‘gatekeepers’, investment consultants wield considerable influence over the allocation of fund assets and can decide the fate and fortune of fund managers as capital moves between investment strategies. For newer fund managers who can satisfy an investment consultant’s selection criteria, a place on a consultant’s ‘chosen panel’ can lead to significant growth in assets under management (AUM).
Given the performance demands placed upon them by trustees, investment consultants must be able to measure the net benefit of their services on long-term investment performance i.e., net of investment management fees.
An Outsourced Chief Investment Officer (OCIO) is usually required when additional portfolio management expertise is needed. The appointment of an OCIO can help to strengthen an organisation’s investment process.
Acting as a third-party investment manager, trustees may appoint an OCIO to take sole responsibility for the management of an organisation’s portfolio (discretionary) or make recommendations to trustees on investment selection (advisory). As a specialist, the OCIO may also provide trustees with expertise on portfolio asset allocation, stock selection and the timing of investments.
By law, pension scheme trustees must take steps to protect the financial interests of their beneficiaries. To prove pension scheme compliance, trustees must therefore seek regulated, detailed and professional investment advice (fiduciary management).
Trustees often hold full-time jobs, leaving them short the time and sometimes lacking specific expertise to perform a variety of trustee duties. By delegating some of these duties and scheme governance to a fiduciary manager, trustees can satisfy their statutory obligations whilst also demonstrating pension scheme best practice.
Today, fiduciary managers’ key clients are the trustees of defined benefit (DB) workplace pension schemes. As DB schemes are expected to gradually decline in number and value in the future, it is up to fiduciary managers to closely monitor fund withdrawals and manage overall fund liabilities.
In recent years, investment analytics’ firms have sprung up to satisfy demand from large family offices and other organisations wishing to bring more of their investment management processes in-house.
In 2020, twelve UK investment consultants launched the Investment Consultants Sustainability Working Group. Created to ensure a collaborative approach on all matters relating to the ESG investment process, this group will attempt to provide guidance to trustees as sustainable investment and asset management continue merge.