The Increasing Importance of Brand in the Institutional Market

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?