“They have in-sourced significantly. And we have adapted to remain relevant.” The endowment funds were among Cambridge’s early clients. It now advises 930 institutional investors. Each has different demands: capital markets research, manager research or advice on specific challenges in asset classes. “No one approach fits all,” Snyman says. Since it began advising Australian investors in 2000, Towers Watson’s business aim has remained unchanged, Miller says. It is to hire and retain smart people who can consistently take great ideas to clients. The business now advises investors managing about $177 billion. As the superannuation and investment industries consolidate it is impossible to accurately predict what funds will ask for in the next 10-to-15 years, Miller says. “But if we stick to this principle, as a business we will be successful.”

Being popular is tough “Ultimately, it’s a very hard job,” Elvish says. “There are countless funds managers kicking down your door, wanting to speak to you. There is a neverending array of products and investments that clients want to consider. And there is a limited amount of resources and time.” Nearly every funds manager wants to know the investment consultants. In turn, these gatekeepers to deep pools of institutional money rely on managers as sources of ideas. “Consultants are fortunate,” says Chant, who regularly helps funds choose consultants. “They have the benefit of talking to many managers regularly and getting the benefit of their ideas.” He believes the “real idea-generation” within consulting businesses is sourced from funds managers. But it takes time to find managers worth listening to. “Every single day we get knocks on the door from funds managers telling us they have hugely compelling ideas for our clients,” Miller says.

“But the reality is that the majority of ideas and opportunities we come across, we reject.” He says the best funds managers have “a lot of intellectual property and brain power” that benefits Towers Watson and its clients. Conversely, some of the “richest ideas” the consultant taps into have come from the investment staff of large funds. Like most consultants it is connected to many sources of ideas. Its job is to pick the best and help clients implement them – but also to challenge clients. “I think a lot of institutions are subject to status-quo bias,” says Gareth Abley, head of capital markets at MLC Implemented Consulting and the former boss of its $12 billion implemented consulting business. “It’s much harder to get a new idea into a portfolio. The hurdle for something new to get in is much higher but there is a level of acceptance and stickiness when something is already in.” As a result, institutional investors usually adopt new ideas slowly. This can be detrimental and policies for proving new ideas – and for testing existing ones – should be applied rigorously, Abley says.

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