FRC Predicts Growth in Use of External Managers

The FRC study, titled “Building a Better Sub‐Advisory Business: Hiring, Retaining, & Firing in a Changing Market,” finds that fund manufacturers continue to consider product performance to be the primary factor in deciding whether to hire, retain, or fire external managers on a fund. However, other factors such as the stability of the sub‐advisory firm, the track record of the portfolio manager, and the quality of the risk management have become more important to the evaluation process since the credit crisis, FRC said.

All of the fund manufacturers surveyed by FRC anticipate merging or liquidating funds in 2009 to 2010. While this will reduce the number of existing funds, FRC said, new domestic and international funds in a variety of asset classes will be rolled out to replace those being merged away, creating a new product landscape in 2010.