Thought Leadership

The Increasing Importance of Brand in the Institutional Market

February 13, 2023

New York state civil employees and retirees started 2023 off right with a loosening of investment restrictions on public pension plans. The New York governor approved emendations to the state’s Retirement & Social Security Law, which dictates the legal composition of defined benefit (DB) portfolios. The expansion of the “basket clause” increases the total possible allocations in alternative investments, from 25% to 35%. And according to our Cogent Syndicated US Institutional Investor Brandscape report, DB pension plan administrators intend to increase asset allocation in alternative investments over the next three years, signaling that this is a timely and welcome expansion. With markets struggling, this allows plan administrators more flexibility in building a diversified plan and gives them more freedom to explore new opportunities in their goal of protecting and growing their enrollees’ pensions.

While this is great news for New York enrollees of public pension plans, it highlights that brand is even more important in light of these strict rules. Public pensions are subject to so many limitations and mandates on their plan composition by the government that only a small percentage of their plans are truly up for grabs in terms of choosing products and an asset management firm to partner with on them. Even with the expansion in allowable alternatives allocation, there’s still limited shelf space for managers, and building a brand these investors will remember and turn to will matter in the effort to grab a spot.

Continuing with New York state as a case study, there are numerous mandates that can affect an asset manager’s approach in vying for a percentage of the plan.

  • No more than 2% of a plan’s total assets can be invested in equities of a particular company.
  • There are complex regulations on investing with utilities, affecting the products institutional investors can successfully offer and incorporate, such as utility mutual funds.
  • Public DB plans can only invest in foreign equities if the corporation in question has averaged more than $1 billion in sales for three consecutive years prior to investment, placing a heavy restriction on foreign small cap equities and seriously hindering investing in emerging markets.

And all of this is just one type of plan in one location of the US. These types of regulations vary across plan types and from state to state, and are subject to change as old laws are amended or new laws are passed. When building your brand strategy and your path forward for growth in the institutional space, it’s imperative to partner with experts who know the institutional investor audience. Escalent’s financial services researchers work with these investors and are mindful of the changes happening with industry regulations because we work in the space day in and day out. We are in tune with what matters to all of the players in this category, including asset managers and institutional consultants. How can we help you leverage our expertise with these audiences to capture the highest percentage possible of their portfolios?

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Alexandra Aird
Moderator, Financial Services Qualitative

Alexandra has seven years of experience, specializing in ethnographic fieldwork and in-depth interviews which complements her love of travel perfectly. Her insatiable curiosity leads her down intellectually challenging paths—like deciding to learn Japanese—making her a natural for understanding the complexities of the financial services space. Over the years, Alexandra has earned a reputation for building sincere rapport with a diverse range of interviewees, and those trusted relationships allow her to delve into what drives human beings. Prior to joining Escalent, she worked for two boutique, Boston-area consulting firms, serving private equity clients and helping law firms and professional services firms improve performance and client service. Alexandra holds a master’s degree in cultural anthropology from the National University of Ireland at Maynooth and a Bachelor’s in anthropology and history from Dartmouth College.