State Street Study Reveals Asset Owners’ Increasing Appetite for Illiquid Assets is Driving Interest in Co-Investment
September 11 2017 - 10:30AM
Business Wire
State Street Corporation (NYSE: STT) announced today the
findings from its latest study, A New Climate for Growth: Adapting
Models to Thrive1, which reveals asset owners are gaining scale
through consolidation and co-investment; and outsourcing certain
key functions, while bringing others in-house.
Over the past five years, nearly a third of asset owners
surveyed (30 percent) have brought some asset management activities
in-house; and 23 percent plan to do so over the next 12 months. Two
thirds of asset owners (66 percent) also believe institutional
investors with multiple funds will increasingly consolidate them
over the next five years.
However, when bringing more functions in-house asset owners have
faced multiple challenges; 53 percent of surveyed respondents
stated operational resources are being drained as a result of
managing the insourcing process; and 57 percent have struggled to
get the necessary skills and talent in place to do so.
More than half (54 percent) of the asset owners surveyed see
co-investment – where two or more institutions partner with one
another on an investment – as a way to gain new expertise. Over the
next 12 months, 68 percent, 65 percent and 48 percent of asset
owners plan to co-invest in infrastructure, real estate and private
equity respectively. The study also reveals that over the next 12
months asset owners are planning to increase their exposure to
these illiquid assets.
Another consequence of this trend toward gaining scale is the
reassessment of priorities – with asset owners doubling down on
certain operations and outsourcing others. More than a third (36
percent) of asset owners have outsourced certain functions so they
can focus on value-adding activities in-house; with 37 percent
outsourcing functions where they were unable to get scale quickly
enough in-house.
“Given that mounting cost pressures and persisting
lower-for-longer yields are systematic changes to the investment
environment, it seems clear that the trends identified by our study
will likely continue as asset owners strive to deliver better
returns at lower costs to meet liabilities,” said Martin Sullivan,
head of asset owner solutions, Americas. “Finding the right
partners to work with, will be the key to ensuring this strategy of
gaining scale, reassessing internal resources and reviewing
external support pays off.”
Later this year, State Street will unveil a new benchmarking
tool, which will allow its clients to benchmark themselves against
the research findings and measure their preparedness for the future
versus their peers.
For further details on the study, please click here.
1 A New Climate for Growth: Adapting Models to Thrive is based
on a survey of more than 500 institutional investors and asset
managers from 15 countries in the Americas, Europe and Asia
Pacific, and is focused on these institutions’ priorities for
growing their assets, businesses and improving their investment
performance over 1-5 years. Based on this survey’s results it
highlights key conclusions that outline the strategies and models
necessary to achieve these growth aims. 305 were global asset
owners, including 150 pension funds, 100 insurers, and the rest
were endowments and sovereign wealth funds
About State Street Corporation
State Street Corporation (NYSE: STT) is one of the world's
leading providers of financial services to institutional investors,
including investment servicing, investment management and
investment research and trading. With $31.0 trillion in assets
under custody and administration and $2.60 trillion* in assets
under management as of June 30, 2017, State Street operates in more
than 100 geographic markets worldwide, including the US, Canada,
Europe, the Middle East and Asia. For more information, visit State
Street’s website at www.statestreet.com.
* AUM reflects approx. $34 billion (as of June 30, 2017) with
respect to which State Street Global Markets, LLC (SSGM) serves as
marketing agent; SSGM and State Street Global Advisors are
affiliated.
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