Expect at Least $1T Demand for Custom Investments

The market for investment services devised to meet specific institutional client objectives will grow by more than $1 trillion over the next five years, predicts global analytics firm Cerulli Associates.

Custom solutions assets have more than doubled since 2010, and asset growth is projected to be substantial, points out Alexi Maravel, associate director at Cerulli Associates, with assets under management forecast to approach $3 trillion by 2020. “The substantial growth in assets from a relatively low base is a consistent theme in conversations we’ve had with institutions and their service providers,” he says.

“Institutional Custom Solutions 2015: The Drive Towards Objectives-Based Solutions” examines how and why asset managers, investment consultants and other firms are spending millions to build the resources necessary to provide investment strategies more tailored to the unique needs of institutions.

The report defines the U.S. market for custom solutions and analyzes the growth of the various functions that comprise custom solutions, including multi-asset-class solutions (MACS), outsourced chief investment officer (OCIO), liability driven investing (LDI), and pension risk transfer (PRT)/defined benefit plan resolution transactions.

“For such an ill-defined discipline, custom solutions have the potential to upend decades-old practices of asset managers and investment consultants used in assisting institutional investors in meeting their goals,” Maravel says.

Respondents to Cerulli’s proprietary survey report more than 58% growth in custom solutions client assets during the past year, as well as the winning of an average of 13.4 solutions mandates during the same time period, according to Maravel. Given these figures, it is not surprising that firms overseeing custom solutions assets today are so bullish about the future, he says.

More information about “Institutional Custom Solutions 2015: The Drive Towards Objectives-Based Institutional Solutions,” including how to purchase, is at Cerulli’s site.