European asset managers will struggle to justify pooled fund charges as pension schemes and insurers demand separate accounts, a report says.
Institutions are often paying lower fees for segregated accounts, Cerulli Associates, a management consultancy, found.
Only 4% of the asset managers surveyed saw fees fall for assets run in funds in 2012, but 35% expect a decline over the next 12 to 24 months, Cerulli says in its report entitled European Institutional Investor: Challenges, Conflicts and Opportunities 2013.
However, managers expect charging levels to be more defensible when running money separately for institutions. Only 17% of managers predict lower charges to manage assets in segregated accounts over the next 12 to 24 months.
"The pooled fund model that many asset managers grew up on is not dead in Europe's institutional marketplace, but it is struggling to justify its role for the largest of allocators, who overwhelmingly demand separate accounts," says David Walker, the report's author and London-based senior analyst with Cerulli Associates.
He says some managers see segregated accounts as an “unwanted distraction” from their main strategy where clients are comingled. In addition, institutions run a risk when investing separately that the manager will not be able to replicate the portfolio, or returns, that are generated in the primary fund.
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