In-house investing is on the rise, according to Ashby Monk, a blogger on sovereign wealth funds at Institutional Investor (and a former blogger here at Canadian Investment Review). But once institutions choose to bypass intermediaries and bring investment management inside, life changes considerably says Monk who along with co-author Gordon Clark has written a paper on the pitfalls and best practices investors need to consider when making the move to in-house. Below is the paper’s abstract a a link to download from SSRN.
Spurred on by the recent financial crises, a growing number of institutional investors are working to bypass traditional financial intermediaries, agents and centers through the development of in-house teams of investment professionals. As such, the institutional investment community, which is often characterized by broadly diversified and outsourced organizations, is becoming much more involved in the day-to-day asset management of their portfolios. Research shows that this new path offers a variety of important benefits, including higher net-of-fee returns. And yet, there remain significant pitfalls as well. In this paper, we outline the challenges facing would-be ‘in-sourcers’ and offer a series of principles and policies for effective in-house asset management. Drawing on 20 case studies, we conclude that successful in-house asset management is a function of the people, processes, systems and overall resources at the disposal of management. Download the paper.