Liability driven investment high barriers to entry, low margin, why bother

348 views

Published on

TC Jefferson argues why the existence of an LDI team may have unintended benefits for asset managers looking to secure institutional AUM.

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
348
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
1
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Liability driven investment high barriers to entry, low margin, why bother

  1. 1. www.theplenumgroup.comLiability Driven Investment – low margin, high barriers toentry, why bother?LDI, dominated by the big three of Blackrock, LGIM and Insight, is increasinglyconsidered low margin business. Numerous asset managers looking to grow their definedbenefit asset pool have considered entering the LDI space. Recently however somemanagers have actively chosen not to dedicate resource into this space as the outlayrequired and perceived return on this low margin business may not appear to makecommercial sense.Is there a case for operating a liability driven investment practice?At Plenum we believe so. The UK pensions market is so heavily intermediated byconsultancy firms that it is increasingly difficult to penetrate this space without supportand buy ratings from the consultants. For asset managers offering only “off the shelf”products, securing such buy rating and developing the required relationships withconsultancy firms is a tough challenge. With an LDI practice comes a solutions team thathas expertise of both liabilities and assets (with the ability to develop bespoke solutionsfor clients). Such capability goes a long way to raise a manager’s profile with consultancyfirms. Having secured relationships and buy ratings with consultants, the possibility ofpenetrating this market becomes a reality. Once established in this space, managers canthen work to shift clients from the low margin standard LDI into LDI 2.0 or multi-assetclient solutions, as many of the more successful players are currently doing.That is why, despite high barriers to entry and low margins, we believe an LDI typesolutions team is a key ingredient for any asset manager looking to penetrate the UKdefined benefit pensions market.To discuss building up such a team please contact TC Jefferson who is responsible forPlenum’s pension de-risking practice:tcjefferson@theplenumgroup.com This Blog was originally posted on http://www.theplenumgroup.com/liability-driven-investment-%E2%80%93-low- margin-high-barriers-entry-why-bother on September 29th 2011.Plenum 2011 – Financial Services Executive Search

×