Investors have expressed their satisfaction with the high value they place in consultants to achieve their long-term investment goals.
NEPC’s Investor Governance Pulse asked investors to identify their current investment model with their consultant and how they expect the relationship to change over the next five to seven years.
Investors are sticking with the “tried-and-true”consultant model, as 80% of all respondents feel the current relationship with their consultant won’t change.
Twelve percent of respondents feel their relationship will change to less involvement from their consultant, and 8% think they will rely on their consultant more in the coming years.
The partner engagement model proved to be the most popular relationship, with 45% of respondents valuing collaborative work with their consultants.
Partnership models hold strong among various institutional investors. Forty-six percent of public pensions, 41% of corporate pensions and 37% of endowments and foundations anticipate a partnership with their consultant in the long-term.
“The popularity of the partnership model was in-line with our expectations, as there is no substitute for having a trusted and consistent partner on your side during times of volatility and change,” said Mike Manning, managing partner at NEPC, in an e-mail.
Some investors plan to leverage consultants as a resource or a vendor in the future, while others want a more hands-on approach with their consultant acting as an advisor or a manager/outsourced cio.
The use of the manager/outsourced cio model appeared to be the greatest difference among investor types.
In the endowment and foundation respondent pool, 18% will seek outsourced cio services in the future, compared to 7% of public pensions.
Meanwhile, 26% of corporate pensions expect to move to outsourced cio relationships in the future, which represents a 15% growth in the segment’s current use of outsourced cios.
“While 18% is noteworthy, the expected increase in OCIO for the endowments & foundations market was not as high as press coverage would have indicated,” said Steve Charlton, director of consulting services and partner at NEPC, in an e-mail. “While the OCIO model is just starting to gain traction in other market segments, the shift to OCIOs has been going on for many years in the endowments & foundations market. The survey results illustrate this shift will continue steadily, rather than rapidly accelerate.”
Healthcare had one of the largest anticipated moves away from the partner model. About 14% predict a more self-reliant investment model and another 14% foresee a move to the manager/outsourced cio approach.
“Are investors seeking increased involvement from their consultants or do they prefer a hands-off approach? The results varied across different market segments,” Manning said. “Public funds and investors with the largest AUM were more likely to seek less consultant involvement in the next five to seven years. On the other hand, corporate DB and corporate DC plans will seek greater consultant or OCIO involvement.”
The survey gathered responses from more than 200 institutional and high-net-worth investors across endowments and foundations, public pensions, corporate pensions, healthcare and private wealth.
The infographic can be viewed here.