Institutional investors face market conditions and investment challenges (and, in some cases, investment opportunities) that haven't been at the top of their minds for over a decade. In reaction to increased inflation and interest rates, institutional investors actively searching for investment opportunities are looking at current market conditions, but their attention is also focused on asset managers' long-term capabilities, expertise, and capacity, according to The Cerulli Report—U.S. Institutional Marketing and Sales Organizations 2024.

The top factors institutional investors consider when selecting an asset manager for an investment mandate include scale (85%), experience with similar clients (55%), and specialization in a specific asset class (53%). With so much focus on adequate asset allocation in the face of the changing market environment, it is no surprise that expertise in a specific asset class, particularly for those with which an investor is less familiar, would be important for evaluating mandates.

From a service perspective, investors want access to investment decision makers (portfolio managers and analysts), with 38% stating this as a very important element of client service. Clients often turn to portfolio managers to obtain updates on how investment strategies materialize and to learn of any changes they should expect with buys and sells in the portfolio. Overall, 33% of investors state they have quarterly meetings and 31% note that annual meetings occur with PMs.

“These aren't just transactional sales—they are client relationships,” Laura Levesque, director. “Investors want to be certain that communications about investment progress and any important events related to their investment will be properly communicated to them.”

Cerulli recommends asset managers maintain focus on their existing clients as much as prospective opportunities. “The longer a firm keeps a client, the more profitable the relationship becomes,” says Levesque. “Given the abrupt change in the market, asset managers will need to get ahead of any pitfalls to retain clients. In the long run, deviating from stated mandates will be far more likely to get a strategy terminated than short-term poor performance.”