December 13, 2022 | Stamford, CT — In the midst of an historic downturn in financial markets, institutional investors, fund distributors and investment consultants are warning some asset managers that they are not doing enough to differentiate their firms and offerings from competitors.

Over the past decade, the marketplace for asset managers has become increasingly challenging and competitive. A host of factors have combined to push down active management fees, eroding profit margins. In 2022, plunging asset valuations and investor outflows across asset classes made a tough situation even more difficult. 

“In today’s environment, asset managers are under more pressure to differentiate themselves from rivals and give asset owners a compelling reason to hire them,” says Mark Buckley, Head of Investment Management at Coalition Greenwich and author of Winning Through Differentiation - Articulating and Demonstrating Performance+ in Asset Management.

For asset managers, traditional sales approaches based on documenting fundamental factors like performance, philosophy, process, price, and people are not sufficient to win business. Institutional investors, intermediary distributors and investment consultants participating in Coalition Greenwich research repeatedly make the same point: They have dozens and dozens of choices and are looking for something that sets a manager apart from the pack. To win new business  in this competitive market, asset managers must communicate a differentiated value proposition.

The strategies an asset manager selects will depend on their unique competencies, capabilities and positioning.  In general, those approaches fall into three main strategies - operational excellence, product leadership or customer intimacy. 

The broadest and most fundamental way an asset manager can differentiate itself is though operational excellence, which represents an asset manager’s ability to deliver a superior client experience at a competitive price. 

To differentiate oneself as a product leader, an asset manager can expand the definition of ‘product’ to include a broader notion of intellectual capital transfer, including education and advice within the product category.

Finally, one of the most powerful ways for asset managers to differentiate themselves is to specialize on a specific client segment or client type and demonstrate a unique level of understanding of the challenges and issues facing that group (e.g., regulatory requirements) as well as the ability to offer unique solutions that meet clients’ needs. This is the strategy of customer intimacy. 

Winning Through Differentiation - Articulating and Demonstrating Performance+ in Asset Management presents detailed feedback from hundreds of institutional investors around the world participating in Coalition Greenwich’s ongoing investment management studies about the criteria they use in selecting asset managers. Based on that feedback, the report presents strategies asset managers can use to increase their appeal to investors and grow AUM by communicating a differentiated value proposition.