A growing demand for customized asset management services by institutional investors is proving to be an expensive proposition for managers, according to a new report by Crisil Coalition Greenwich.
Providing customized service propositions is becoming standard in the industry, with half (50 per cent) of global investors indicating they were more likely to award additional mandates to current managers who excel at customization, the report noted. But this offering is both expensive and introduces additional operational complexity.
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Investors defined customization as a service model featuring a single point of contact via a dedicated account manager, with notification obligations if there’s a change in manager and carrying customized fees and rebates. Public pension funds valued customized investment agreements, service level agreements and operational setup the most in this model.
About two-thirds of Canadian investors (64 per cent) and global investors (65 per cent) said customization services by asset managers are important to them. For asset managers, these expensive requests can be difficult to deliver at the scale needed and can bog down operations.
“Requests for customization create valuable opportunities for managers to differentiate themselves from rivals and deepen client relationships by providing service arrangements tailored to investors’ specific needs,” said Christopher Dunn, head of investment management in Europe at Crisil Coalition Greenwich, in the report. “However, the growing phenomenon of ‘customization creep’ represents a real risk to asset management bottom lines.”
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