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Investor Economics

Insight April 2003 Quarterly Review

"This issue of Insight updates and refines our coverage of the degree to which mutual fund sponsors contract portfolio management to external sub-advisors.

Our last in-depth analysis, in July 2001, found that major fund companies were increasingly moving money management in-house. That trend is now well established and likely to continue. CI, TD, AGF, AIM, and Manulife provide examples of companies that have moved substantial amounts of money in-house. The big drivers are:

• a bigger share of the value chain at a time when bearish markets and poor sales are hammering profitability;

• more control over a fund’s investment process and less vulnerability to manager departures;

• fund line-up rationalization following mergers and acquisitions.

But the incoming tide has not left sub-advisors high and dry. Indeed, these firms have enjoyed good growth in both assets under management and the number of funds they manage. There are fund companies that lack the size or desire to run their own investment departments. They continue to seek outside help, particularly in specialized asset classes. Here, Clarington provides a classic example of a company that has successfully built a solid fund business with a strategy of predominantly using external sub-advisors."

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  • Tags: investment funds, mutual funds, subadvisory, third-party managers

  • Date Posted: April 23, 2003