While relationships between market participants remain important, Canadian investors are increasingly looking for data and solutions to maximize their manager selection process. Earlier this year, eVestment held our first Canadian Forum, bringing together investment consultants, asset owners and asset managers for a discussion on trends in Canada’s institutional investment landscape. The panel featured Roderick Gomez from Eckler Consulting and Frederick Chenel from Fiera Capital.
Evolution in the Consumption of Institutional Investor Data over the Past 15 Years
New tools for evaluating managers have added depth and transparency to general and firm-specific quantitative and qualitative data, and have helped investors go beyond returns in their due diligence. For instance, when managers or investment teams have delivered similar returns, qualitative factors such as the make-up of the investment team or a manger’s client base can play a key role in manager selection.
“When I first started in this industry, the data we were looking at is mainly returns. Now our job is to look at some of the qualitative aspects of the data is provided by the managers, including information around portfolio management team, AUM and client base. These qualitative aspects are very important,” said Gomez.
The data that investors analyze includes both firm-specific and strategy-level information. Investors and consultants can minimize manager risk by having a solid understanding of an investment manager’s firm ownership and asset growth. Also, any sudden personnel changes may be an indicator to put managers on a watch list. Gomez said, “Investors can get inundated with all this data. I think it’s good for consultants and investment managers to work together and dissect this information.”
On the strategy level, understanding peer universe fees (actual and list prices) gives asset owners bargaining power when hiring a manager. Having the manager’s equity holdings versus the peer group helps investors ask better questions during meetings and the finals presentations.
Increased access to global institutional trends data helps asset managers work better with investors. Through these insights, asset managers can be better prepared to have discussions with investors and get ahead of trends. “We look at data from the U.S. and Europe to anticipate future trends and market needs. By launching a strategy today that may have demand in three years, we’ll have time to build the necessary track record for the future,” said Chenel.
Investors Focusing on Education and Solutions, Not Products
Investment managers are increasingly taking a comprehensive, solutions-based approach that is tailored to a specific investor’s investment objectives. This is a big shift from merely proposing investment products as shots-in-the-dark. This solutions approach is good news for all participants as it allows for more customizable outcomes.
Meanwhile, asset managers are putting more effort into educating investors to cut through the sizable noise amidst massive amounts of daily investment data, and keep clients informed on relevant and innovative developments. Consultants, often in tandem with investment managers, hold annual education sessions on current topics to expose clients to new investment ideas, strategies and asset classes.
Alternatives Shifting to Real Estate, Infrastructure
Canadians have increased their appetite for alternatives, with focus expanding from domestic to global real estate and infrastructure, private equity and new sectors such as agriculture, mimicking the earlier shift from Canadian to global equities.
“I would say over the past year and a half we’ve been ramping up our knowledge of global real estate and U.S. real estate,” Gomez said. “Five years ago, if a European infrastructure manager called me, they would have been low on the priority list. But now, I’d be gladly meeting with them.”