EUROPE – Pension funds are the most fickle of all European institutional investors when it comes to asset managers, according to a new study.

According to the study, compiled by the consulting firm FRC on behalf of US asset manager Invesco, 61% of the sampled European pension funds had fired an external asset manager in the previous year. This compared with 32% of insurers and 39% for other institutional investors, including banks, foundations and companies.

Part of the pension funds’ fickleness was related to a heavy reliance on investment consultants. According to the study, 63% of the pension funds used a consultant, compared with 30% for insurers and 28% for the other investors.

Overall, the study found, 43% of the institutional investors had sacked an asset manager in the previous 12 months – about the same level as in earlier years.

“This suggests that the average length of an institutional-external manager relationship is approximately five years,” it noted.

The study encompassed 98 institutional investors in Germany, France, Italy and the Benelux countries.

Roughly one-third of the investors queried were pension funds and roughly one-fifth insurers. Their collective assets totalled €400bn.

In terms of investing, the study found that they were increasing their exposure to alternative classes, although not necessarily to hedge funds. “Hedge fund investing averages around 1% of assets and usage will not grow in the short term,” the study said.

Instead, the study added the investors were increasing allocations to other alternatives, notably structured products and exchange-traded funds (ETFs).

“A third of institutional investors in Europe are now investing in structured products and this is expected to remain the case in 2005,” it said, adding that index-based products were the most popular.

Regarding ETFs, the study said one-fourth of institutional investors in Europe would likely be using them a year from now.

Last month it emerged that European aerospace and defence giant EADS had tapped Invesco’s German arm to set up and manage so-called “overtime accounts” for all its employees in Germany.

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