single frog in a pond facing multiple frogs Another perception is that large asset managersrely on less innovative solutions that hold them back. (Photo:Shutterstock)

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Large asset managers just aren’t up to the task ofproviding investors with alpha. Instead the small and nimble are betterpositioned to deliver.

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That’s according to new research from CoreData,which finds that 90 percent of institutional investors globally believe thatsmaller boutique firms are better able to deliver returns than thebig guns, which, they think, are held back by bureaucracy (65percent) and a more risk-averse stock selection process (42percent).

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In addition, 39 percent say that big firms’ centralized powerstructures build time inefficiencies into the process, while 24percent say large asset managers rely on less innovative solutionsthat hold them back in their ability to deliver returns.

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And while 80 percent of institutional investors say they’reeither not concerned with a firm’s size or would actually seek outa boutique firm if searching for an active manager, 90 percent ofthose who say that higher alpha is an essential factor in choosinga manager prefer to work with smaller firms. Only a quarter lookfor brands when selecting a firm, while 60 percent rely onreputation and a firm’s fiduciary record.

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Specialization and/or a niche approach attracts 53 percent,while access to different asset classes is important to 50 percentand 33 percent consider the management fee structure.

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While investors look upon technological and digital disruption(52 percent) and M&A activity (46 percent) as the chiefopportunities available for asset managers, they have a distinctlydifferent view of passive investments and regulatory change, whichare seen as challenges by 46 percent and 44 percent of investors,respectively.

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In addition, 61 percent see a future recession as a threat foractive managers, not an opportunity.

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Other factors respondents say weigh on larger firms’ ability tobring home larger returns are tougher regulation requirements (23percent) and an overall client profile that limits managers’ fundselection (9 percent).

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READ MORE:

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Risk exposure: Does your plan still offer companystock as an investment option? 

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2019 stock market outlook: slower growth but norecession

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Marlene Satter

Marlene Y. Satter has worked in and written about the financial industry for decades.