EUROPE – Hewitt Associates, an advocate of so-called ‘unconstrained’ mandates, has acknowledged difficulties n finding managers to run assets that are not benchmarked to an index.

There are “capacity constraints in who we can find to run the money” said Hewitt consultant Laurence Taylor. He said boutiques were the first to respond to the unconstrained approach.

Firms included names such as NewSmith and Edinburgh Partners – run by former staff at larger houses. But now larger institutional providers, often through in-house boutique-style teams - had picked up on the trend, he told a briefing for journalists.

He said there was no reason why the unconstrained market couldn’t increase “significantly”. And he revealed that Hewitt’s clients have so far put around £4bn (€5.9bn) into unconstrained mandates. The firm announced yesterday that 39 of its clients had gone over to the unconstrained approach.

But Taylor warned: “This is not a magic solution or a utopia of active management.”

Hewitt has developed software that generates random portfolios as a way to measure manager performance, he told a meeting organised by SG Asset Management.

Taylor added that the unconstrained approach required a closer relationship between the client, consultant and manager.

“You’ve got to be closer to your fund manager,” he said. “You’ve got to be talking. You’ve got to be talking about the specifics.”

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