Key Takeaways
- • Coalition Greenwich research finds more than 85 percent of U.S. institutional investors work with an investment consultant, rising to 95 percent among public pension funds.
- • The 20 largest investment consultants now hold about 85 percent of institutional client relationships, up from roughly 66 percent in 2014.
- • More than 70 percent of surveyed allocators use consultants to find new or existing managers, and roughly half say consultant recommendations are the primary driver of manager identification.
- • Consultant scale is translating into negotiating leverage on fees, with consultants providing benchmarked fee data and, in some cases, negotiating on allocators' behalf.
- • Two-thirds of institutions rely on consultants for ongoing oversight of their investment managers after an allocation is made.
Summary
Investment consultants advising pension funds, endowments, foundations and other asset owners are larger and more influential than at any point in recent memory, according to new research from Coalition Greenwich reported by Institutional Investor. The firm found that more than 85 percent of U.S. institutional investors work with a consultant, a share that has trended upward in recent years. Among public pension funds, 95 percent of those polled employ at least one consultant.
The research, based on interviews with 708 individuals from 575 U.S. tax-exempt funds managing pools larger than $150 million conducted between February and November 2023, shows allocations are concentrating among the largest firms. The top 20 consultants held about 66 percent of institutional client relationships in 2014 and hold roughly 85 percent today. Todd Glickson, head of investment management at Coalition Greenwich, attributed the trend to consolidation in the consulting and OCIO space, stating that "those with scale are begetting scale." He cited the benefits of global reach, scale, guidance and pricing as drivers of the shift.
Consultants' core function remains manager selection. Greenwich found more than 70 percent of respondents use consultants to identify new or existing managers, with roughly half saying consultant recommendations are the primary driver of that process. The role is especially important for mid-size allocators that have investment staff but lack the resources to source managers independently.
Fee negotiation is another area of influence. Allocators rely on consultants for benchmarked fee data at minimum, and in some cases consultants negotiate directly on their behalf. Glickson said the largest 20 firms have "more bargaining power than they ever had before," since a single consultant may represent several clients seeking different structures from the same manager, whether through a fund, separately managed account or collective vehicle.
Once allocations are made, two-thirds of institutions use consultants for ongoing manager oversight. Greenwich also used survey responses on consultant services to compute its Greenwich Quality Index, with CAPTRUST, Graystone Consulting, Segal Marco Advisors, Angeles Investment Advisors, Asset Consulting Group and Mariner Institutional (formerly AndCo Consulting) ranked among the top consultants in 2023.
The research, based on interviews with 708 individuals from 575 U.S. tax-exempt funds managing pools larger than $150 million conducted between February and November 2023, shows allocations are concentrating among the largest firms. The top 20 consultants held about 66 percent of institutional client relationships in 2014 and hold roughly 85 percent today. Todd Glickson, head of investment management at Coalition Greenwich, attributed the trend to consolidation in the consulting and OCIO space, stating that "those with scale are begetting scale." He cited the benefits of global reach, scale, guidance and pricing as drivers of the shift.
Consultants' core function remains manager selection. Greenwich found more than 70 percent of respondents use consultants to identify new or existing managers, with roughly half saying consultant recommendations are the primary driver of that process. The role is especially important for mid-size allocators that have investment staff but lack the resources to source managers independently.
Fee negotiation is another area of influence. Allocators rely on consultants for benchmarked fee data at minimum, and in some cases consultants negotiate directly on their behalf. Glickson said the largest 20 firms have "more bargaining power than they ever had before," since a single consultant may represent several clients seeking different structures from the same manager, whether through a fund, separately managed account or collective vehicle.
Once allocations are made, two-thirds of institutions use consultants for ongoing manager oversight. Greenwich also used survey responses on consultant services to compute its Greenwich Quality Index, with CAPTRUST, Graystone Consulting, Segal Marco Advisors, Angeles Investment Advisors, Asset Consulting Group and Mariner Institutional (formerly AndCo Consulting) ranked among the top consultants in 2023.
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