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U.S. Institutional Assets Show Modest Boost: Cerulli

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Assets overseen by institutional investors in the U.S. rose about 6% in 2014, which is modest in comparison to the 9.8% boost in the previous year, according to recent research from Cerulli Associates.

While modest overall growth, the global analytics firm found significant growth when it looked closer within the institutional channels – specifically within custom solutions and sustainable investments.

Chris Mason, research analyst at Cerulli, says, these areas represent “continued addressable market opportunities for institutional asset managers.”

According to Cerulli’s research, there is a vast and growing demand by institutional investors for more customized investment solutions.

“Custom solutions assets have more than doubled since 2010 from about $500 billion to more than $1 trillion last year,” Mason said in a statement. “Cerulli’s projections show increasing demand for custom solutions in the next five years from corporate pension plans, public plans, and non-profits.”

Cerulli also finds that asset managers and investment consultants are moving quickly to address the demand for sustainable (aka “environmental, social and governance” or “impact”) investments by U.S. institutional investors.

“Asset managers and investment consultants that focus on environmental, social and governance (ESG) factors will benefit from increased demand as different stakeholders place more pressure on investment committees to consider such factors in their investment decision-making process,” explained Mason.

According to a proprietary survey done in partnership with The Forum for Sustainable and Responsible Investment (US SIF), 64% of responding asset managers indicated that they believe it will be “very important” for managers to offer ESG capabilities in the next 2 to 3 years in order to compete in the marketplace.

Other recent research also reiterated this point.

The CFA Institute’s recently published ESG Guide for Investment Professionals showed that 73% of survey respondents consider ESG issues when making investment decisions and 63% did so to help manage investment risks. (Forty-four percent consider ESG issues because their clients demand it).

Similarly, Cerulli’s November Cerulli Edge report found that 74% of investment managers take ESG factors into account when making investment decisions, and Cerulli says risk management is the single most important reason why.

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