Infovest21 Survey: 36% of funds of funds use or plan to increase their usage of managed account platforms

Following the events of 2008 – the liquidity crisis, the Madoff Ponzi scheme, managers’ freezing redemptions, imposing gates - managed account platforms were talked about as a possible solution. Managed account platforms, to varying degrees, provide transparency, liquidity and control of assets.

Infovest21 conducted two surveys – one of institutional investors and one of funds of funds – to determine current thinking and usage of managed account platforms. The surveys were conducted by phone and email during February and March 2010. 27 institutional investors and 29 funds of funds were surveyed.

Highlights of the findings on funds of funds include:

An even split existed between those funds of funds that current use managed account platforms and plan to increase their usage (36%) and those that say they do not use and have no plans to use managed account platforms (36%).

Another 14% do not use managed account platforms but expect to within the year. Another 7% are in the exploratory phase but don’t have time expectation for when they will be using platforms. 7% currently use platforms but don’t plan to increase usage while 7% were not familiar with the concept.

The most important criteria in determining the platform used was flexibility (31%), followed by flexibility to select managers (25%) and then transparency (25%).

Over 60% of the funds of funds said their experience with managed account platforms has been as expected. Another 11% said the experience was better than expected while 11% said it was worse than expected.

While 18.5% said there were no problems with the platform, the same percentage cited limited manager selection and high implementation costs. Less cited problems, in order, were: higher administrative costs, not run pari passu to the fund, operational issues, high minimums, long set-up time and inability to customize according to specific needs.

Lois Peltz

, president of Infovest21, observed, "When asked what they would like included in platforms that were not current provided, some write-in answers included: lower fees; one platform with a wider range of strategies, improved technology and reporting; more customized reporting and more latitude for customization."

Of the funds of funds responding to the survey, over 80% were US-based, 15% were in Europe and 4% were in Asia. The average assets under management were $3.7 billion. Of those that specified the percentage of assets on managed account platforms in 2010, the average was 30.3%.

Excerpts from Infovest21’s survey: Institutional Investors’ and Funds of Funds’ Views on Managed Account Platforms.
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