Pension funds are seeking "holistic" asset managers capable of managing traditional investment strategies as well as alternatives, according to Debra Brown, a consultant at executive search firm Russell Reynolds. Savvy investors are deviating from style-box mentalities and are giving their managers the flexibility to do structured and derivative investments. Using multi-asset class managers saves time and money spent on searches, she continued. These firms can take on an advisory role and provide an array of services that are structured for each client.

Goldman Sachs Asset Management is seeing increasing demand from pension fund clients for multi-product mandates--where a firm takes several strategies it already manages and puts them together into one portfolio. Pension plans want a package that combines liability hedging with return generation, said Kurt Winkelmann, head of GSAM's Global Investment Strategies group. GSAM agrees a risk and return target up front. These mandates charge a single performance fee, and because they diversify across strategies, performance is more stable than a single asset class mandate, and so clients can calculate their fees with more predictability. Multi-asset class mandates also help clients achieve access to new capacity as the manager launches strategies, he explained. "What they want to do is take organization risk, not, if you will, search risk. The way to respond to this is the village of boutiques idea."

The increasing global expansion of asset managers will call for pension plans to hire compliance specialists and lawyers, Brown observed. These experts should help funds improve their understanding of what investment strategies are available to them.