The world's asset managers and pension funds do not see eye to eye on the type of investment products that are most needed to deal with the rising cost of a greying population, a study said on Monday.
More than half of pension funds polled by research organisation CREATE said investing in global stocks was the best way to meet their needs, but more than 60 percent of asset managers said liability matching investment products were most suitable.
The findings show that asset managers must work harder to convince their often sceptical clients they have the products to do the job, Amin Rajan, principal author of the report and CREATE's chief executive, told Reuters.
There's a huge mismatch between buyers and sellers here.
In recent years, consultants and fund managers have urged pension plans to embrace hedge funds and use techniques including derivatives to match their expected benefit payouts.
CREATE found that while many pension plans appreciated that new investment ideas could be useful, they doubted that the fund management industry could deliver simple, transparent products that actually worked.
In far too many cases, asset managers in regions such as continental Europe did not bring out significant innovations but merely pumped out funds that mimicked other funds, he said.
There is a lack of trust. In the past, pension funds bought new strategies only to find that they did not get what was expected. The products did not do what they said on the tin, he said.
CREATE got responses from 300 asset managers and pension plans in 37 countries, representing $30 trillion (16 trillion pounds) in assets. The study was sponsored by U.S. banking conglomerate Citigroup and U.S. money manager T. Rowe Price.
I hope it (the report) stimulates debate about where the asset management industry is going and why so much of a copycat tendency is going on, Rajan said, referring to a tendency of asset managers to mirror products of their rivals.
Fund management firms are content to devise products and sell them without considering whether there is demand for such items in the first place, he said.
Elsewhere, the report said some fund managers have begun to innovate to cater to an increasingly educated client base.
The study also said the business of investing money is likely to be increasingly split off from the marketing and distribution of funds to clients.
As an example, Citigroup last year offloaded its in house asset management business to focus on its core banking activities, passing its assets to U.S. investment firm Legg Mason.