UK – Multi-management firm Investor Solutions has questioned the commitment of big consulting firms who are trying to break into the sector.

“Do they really believe in multi-management?” asked global chief investment officer Glenn Silvermann. He said recent moves in the area by large firms were purely a defensive move on their part.

“Multi-management is a different business premise. But we understand why many are looking at that,” Silvermann told a briefing this week. He saw consolidation ahead in the market.

Silvermann declined to name names. Such firms, Silvermann said, usually had just two or three staff engaged in multi-management – compared to his firm’s 20 or so.

Mercer Investment Consulting recently launched a service called Mercer Global Investments, which it says has had an excellent reception with US clients.

Investor Solutions, part of the Alexander Forbes group which includes actuaries Lane Clark & Peacock, believes high consulting fees and increasing burdens on trustees will see multi-managers topple consultants at small and mid-sized schemes.

“In the smaller end of the market – up to £100m – many schemes struggle to justify the fees investment consultants charge to organise beauty parades,” said Silvermann’s colleague, senior investment manager Richard Dinham.

“Consultants and multi-managers will still co-exist, but there will be some shrinkage in parts of consultation and more of the burden will be placed on the multi-manager.”

HSBC’s investment consulting director, John Finch, disagrees. “What multi-managers don’t do for clients is deal with issues of strategy,” he said. Furthermore, he believes that multi-managers will be squeezed from the market by liability –driven investment solutions such as Standard Life.

Finch also disagreed that consultant fees cripple small funds. “Many clients don’t always perceive the value in consultancies. They also don’t realise what multi-management fees are as they are built into the cost. Consultants just give that added value that multi-managers don’t.”

Topics