Consultants, Transparency And Manager Selection Light - A Brief Overview 2010

Markus Hillis an independent assetmanagement consultant.His professionalbackground includes,among others, the SEBBank and Credit SuisseManagement. His activitiesinclude management ofmandates (for example:Arcturus/BG Funds) in theareas of sales, marketing,and public relations. He isalso active in the areasselecting themes in thespecial areas of targetfunds with a multi-management aspect basedon special tasks withspecial themes of fundboutiques and mutualfunds for institutionalinvestors. He is furtheractively engaged in thecooperation with themarket-leading PrivateLabel Funds Master KAG inGermany (UniversalInvestment). He is aninitiator of suchauthoritative studies on thefirst all-German ConsultantQuestionnnaire byRCP-Telos etc. Variouspublications here andabroad underscore hiswide-ranging activities asbranch [email protected]

Username:

Password:

remember login

Consultants, Transparency, andManager Selection “light”- a BriefOverview A conceptual way of thinking, from the areas ofmarketing and project management, can effectively beapplied to other sectors, including the area of manager-selection. Markus Hill analyses the possibilities for efmreaders.

On talking to the representatives ofvarious groups of investors(utilities, pension funds, industrialcompanies, etc.) one finds a largevariety of methods in the analysingprocess. Some have their ownexpert personnel, who activelywork on data material such asperformance, style of investment,and risk numbers. Otherrepresentatives use well-knownconsulting firms such as MercerInvestment Consulting, AlphaPortfolio Advisors, and FeriInstitutional Advisors. Some amassa wealth of material, with theaccompanying frustration of tryingto master the data flood – amethod which looks like managerselection per “hit and miss”. Theyread something here and there,attend various events – in otherwords, the manager who presentsthe best roadshow and gives thevisitor the best impression isselected.

Mutual Funds: Ratings,Rankings, and Umbrella FundManagers (Multimanagement)In the long run, institutionalinvestors will employ consultantsfor numerous tasks and problems.One of these areas is managerselection, with their sometimesquestionable data banks.

The day may still be far awaywhen asset managers andconsultants create uniform,openly accessible evaluation toolsand performance measuringstandards that all can agree on.

Of course, asset managers want toappear on the consultants’ lists.However, there are some sourceswhich can be valuable for theinstitutional investor before makinga final decision: Due to thefrequently artificial separation ofthe retail and institutional markets,

::: european fund manager - market developments ::: http://www.efmonline.co.uk/market_developments/marketdev_article10...

1 von 3 29.06.2010 07:24

The basic problem for alldecision makers is the seeminglyoverwhelming number ofmanagers and investment styles.

The basic problem for all decisionmakers is the seeminglyoverwhelming number of managersand investment styles. This iscombined with a lack oftransparency of the market forinstitutional asset managers –a fact upon which an entireindustry, with satisfaction, lives:asset management firms,consultants and investors (thetask: investments of investors).

Choosing Asset Managers –Amassing Data and Researchingor “Number Crunching”Initially, consultants perform avaluable function in a highlyspecialised area of our economy.They promote the “diffusion ofknowledge” and increase thequality of expertise. The discoveryof new management methods orthe evaluation and “promotion” ofnew asset managers are thepractical results.

The problem for the institutionalinvestor is the quality factor. Justas in the case of asset managers,the chosen consultant can only bejudged and controlled to a certaindegree. Does the consultantmerely send out managerquestionnaires as a basis for aseemingly unique data bank? Doesthe consultant have the expertisehe professes, or does the investorsimply finance the training costs ofsome junior researchers? Are thereenough personal talks withmanagers? Does the consultanthave the same problems withcapacity (personnel, equipment,etc.) as the institutional investorhimself? All these questions areoften posed in talk withinstitutional investors and withasset managers as well, but manydo not want to be quoted. This is aphenomenon in this industryworthy of separate investigation. Isthis “business political correctness”about to take over the assetmanagement business?

such simple sources of informationas ratings and rankings areoverlooked. They can give the firstpointer in the search for a specifiedconsultant which can improve thecooperation between both sides:institutional clients do not have thefeeling that they are giving anorder “into the blue” and theconsultant can better aim at thesolution for the client. Successfulmanagers of funds of funds/multimanagers also frequently orientthemselves at the beginning of amanager selection with ratings andrankings. On viewing the favouritesin the mutual fund area, one can goto the next step – a specificindividual search or a specificsearch order for a consultant for ayet unknown manager with similarqualifications. It may be worthwhileto familiarize oneself with suchnames as Feri, Standard & Poor’s,Morningstar, Lipper, and Citywire,and naturally with the advantagesand disadvantages of theirrespective methods: the “kiss ofdeath” effect, the quality of theirprognosis in the ratings andrankings, lack of a total picturesuch as a picture of a“management universum”. Allthese are points to criticize thatalso may play a role in thediscussion about consultantrecommendations.

OutlookThe “whip of transparency” fromthe mutual fund industry is slowlycoming to the institutional sector aswell. The day may still be far awaywhen asset managers andconsultants create uniform, openlyaccessible evaluation tools (i.e.composites) and performancemeasuring standards that all canagree on. Perhaps a stronger“consultant beauty contest” will beestablished. The consultant as aninstitution has rosy prospects formany years to come.


2 von 3 29.06.2010 07:24


3 von 3 29.06.2010 07:24

Economy & Finance

Consultants, Transparency And Manager Selection Light - A Brief Overview 2010