Alternative asset managers face substantial
barriers to inclusion on consultant recommendation lists in
Europe, according to new research from Cerulli Associates.
Not only must firms have at least 100 million ($105
million) under management to qualify for consideration, most
consultants require at least a three-year track record, locking
out small and emerging managers, the research firm found in a
report this month.
Whats more, alternative asset managers surveyed by
Cerulli said its difficult to appeal to consultants
because of the disparity in how theyre rated and
measured. As a result, firms with original or unconventional
strategies struggle for spots on industry shortlists, as they
cannot be judged against traditional benchmarks, the research
Consultants serve as the gatekeepers of the asset management
industry, and their buy lists often determine which
managers can access investor capital as they look to raise
Financial Conduct Authority report on the U.K. asset
management industry released in November found that the
regions twelve largest investment consultants influenced
the deployment of as much as £1.6 trillion ($1.9
trillion) in pension, endowment, and insurance assets. Yet the
regulator said their recommendations failed in their purpose of
highlighting outperforming managers and instead acted as a
barrier to innovation.
When looking at the performance of investment products
recommended by investment consultants our analysis shows that,
across all product categories taken together,
consultant-recommended products do not perform better than
non-recommended products, the Financial Conduct Authority
said in its report.
Barbara Wall, managing director at Cerullis European
office, said consultants are reluctant to change their
recommendations if it means eliminating a fund from their short
Unpicking clients from a fund costs a consultant in
terms of both time and money, but, most damaging of all, it is
tantamount to admitting a mistake, she said.
Still, the research firm suggested that the tide may be
turning for alternative managers, as consultants rethink their
strategies in the face of a low-return environment.
Managers that show perseverance and patience in
maintaining regular contact with consultant representatives
should see a greater number of opportunities with
consultants, said Justina Deveikyte, associate director
at Cerulli. Strategies that had been closed to
consideration are open again.