Some asset managers are more likely than others to get a pass from institutional investors during periods of underperformance, according to a survey conducted by Cogent Reports.
Vanguard Group, BlackRock, and Charles Schwab are the three most-trusted asset managers among pension plans with at least $250 million in assets, according to the findings by Cogent Reports, a unit of consulting firm Market Strategies International. T. Rowe Price Group and Dodge & Cox Funds were the fourth and fifth-most trusted brands.
The survey found that an asset management firm’s reputation can have equal importance or even outweigh investment performance as a key criterion when institutions are selecting a manager. Brands establish trust through their organizational stability, an experienced investment team, a distinguished investment philosophy, and level of service and support.
“I was surprised to see how much brand trust resonated,” said Linda York, senior vice president at Market Strategies and author of the report entitled “US Institutional Investor Brandscape.”
Cogent surveyed 374 institutional investors and asked them to identify the asset managers they trusted from a list of 55 brand names.
Vanguard also topped the list as most-trusted among non-profit institutions, which includes endowments and foundations. Dimensional Fund Advisors, BlackRock, Commonfund, and GMO round out the top five.
When the survey drilled down to ask investors which managers excelled in certain areas, BlackRock topped Vanguard in product innovation and thought leadership, York said, adding the results make sense as Vanguard tends to be known for its ETF products and consistency, while BlackRock is very public with its thought leadership. “They definitely have two different personalities,” she said.
In the defined contribution market, fees are a main reason why investors will drop a manager, while underperformance is an important reason for pensions, York said. Investors also named lack of communication as a big factor in considering leaving an asset manager. Failing to communicate with clients during periods of underperformance only makes matters worse, York said.
Elements of trust and reputation can help an asset manager weather periods of underperformance, the survey found.
“If the asset managers are true to their philosophy and true to their approach, that’s reassuring to the client,” York said. “That can go a long way, and that’s a component that we say contributes to trust.”
