GPI 2021: External managers

Covid-19 pushes investors towards external managers

CENTRAL BANKS are becoming far more adventurous as investors, increasing their exposure to equities and experimenting with a broader array of asset classes, including relatively illiquid infrastructure bonds. As with sovereign and pension funds – their global public investor peers – this development requires forging close relationships with external managers. According to the 2021 OMFIF GPI survey, central banks still only allocate a fairly low proportion of their reserve assets – just 6% – to external managers on average, compared with 38% for pension funds and 39% for sovereign funds (Figure 1). But by engaging some of the world’s biggest fund management firms, those reserve managers gain access to new and more complex asset classes with the potential to outperform in a lower for-longer environment. The global pandemic has helped to drive even more GPI business the way of these large fund managers. ‘There was a fear, at the beginning of the pandemic, that everything would collapse,’ says Eric Dussoubs, who runs the official institutions group at Amundi, Europe’s largest asset manager. He adds, though, that the ‘new work organisation did quite well in the end.’ Some central banks froze up, reducing operations to the bare minimum of helping keep their economies afloat. This was especially true for smaller reserves managers burdened by a lack of strategic flexibility and infrastructure, with a low capacity to work from home.

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