Investors Ready for New Era of Asset Management Innovation, Study Says

An annual, independent study released today by CREATE-Research, commissioned by Citi’s Global Transaction Services and Principal Global Investors, finds that while innovation is deemed to have produced mixed results over the last decade, asset owners have retained an appetite for innovation, where specific principles are met.

The survey results revealed that the US has been both a principal innovator as well as early adopter in asset management. The US’s long renowned entrepreneurial culture is one factor as well as its large pension backyard which currently harbors 58% of the world’s total pension assets. The study reveals common sentiment that the DC product pipeline is likely to improve in this decade with accumulation and decumulation options in order to attract ever more assets from trust-based plans.

The report, entitled Investment Innovations, raising the bar, surveyed over 500 respondents from pension plans, asset managers, consultants, administrators and distributors from 30 countries with a combined AUM of over $29 trillion. It asked respondents which financial innovations they believe have worked, which haven’t, what should be the main thrust of innovations over the next three years and what specific improvements and actions they want to see related to these innovations.

The headline findings cite 2008 as a watershed for financial innovation with many of the new products, asset classes, return enhancing tools and asset allocation techniques developed in preceding decades viewed as becoming increasingly fallible, as the financial crisis developed. This prompted a dangerous mismatch in expectations between asset managers, advisors and their clients. Now, client engagement is rising again and the report presents a call to action for asset managers and owners to work more closely together to add value in the innovation process, better aligning their interests and expectations for mutual benefit.

Prof. Amin Rajan, CEO of CREATE-Research and the study’s author, said:

“The global economy is still in a state of uncertainty and strong headwinds in the shape of financial regulation, scarcity of talent and revised client expectations are buffeting the industry. Against this backdrop, there has to be a clear line of sight between innovations and client needs. Asset owners will demand creative solutions which deliver tangible value. New products developed without such fundamentals and without clear client engagement will struggle to gain traction.”

Key findings of the report include:

  • Some 35 innovations saw significant adoption in the last decade. 57% of respondents said that emerging markets equities delivered most value while leverage recorded the worst performance, according to 40% of respondents
  • 50% of pension plans believe a switch from products to solutions will be a key driver of innovation over the next 3 years
  • A mismatch exists between asset managers’ and clients’ expectations – 39% of the clients think further product innovation will deliver genuine value over the next three years versus 64% of the asset managers
  • Lack of client engagement is viewed as a major cause of failed innovation: 73% of pension funds surveyed are only rarely/occasionally engaged when asset managers innovate their financial products
  • 88% of asset managers foresee further product innovations over the next three years, although of these, 52% believe they will be incremental, improving existing innovations, rather than creating new ones

Barbara McKenzie, Chief Operations Officer of Principal Global Investors, said:

“The report explains that innovation must be redefined to match new client circumstances. As a multi-asset class, multi-boutique organization; Principal Global Investors is well positioned to address the growing demand from clients for more customized investment solutions. We have sophisticated sales and relationship management teams globally to spot trends and fill needs.

In the US, products of most interest tend to be those with high income producing capabilities, given the ‘living-in-retirement’ needs for a growing percentage of the population, but also emerging markets capabilities because of their growth and diversification potential.

The report also finds that in the next decade, DC products will experience further innovation. The industry is already seeing growth in investment options, particularly in areas of target date and target risk funds --- where The Principal is a leader.”

Bob Wallace, North America Head of Citi's Securities and Fund Services said:

“The current marketplace for Investor Services has evolved to a place where client focus on the elements of risk management and control are driving them to seek more holistic investment solutions from their providers, as well as the fact that they are increasingly concentrating their buying with fewer providers. A comprehensive set of innovative solutions across the entire asset class spectrum has become a necessity for winning business, as well as the ability to provide tailored services that meet individual client objectives."

"At Citi, we have established multi-pronged efforts to ensure that our innovations are driven by client needs. We work with our global and regional clients to introduce new services before we launch in the global market. Innovation plays a key role in helping our global clients offer their services in new local markets, and it also serves to help clients from overseas markets launch new services in the U.S. By engaging in close dialogue with our clients, we’ve been able to develop a comprehensive suite of investor services spanning the back and middle office, with a strong focus on transparency to help our clients navigate the regulatory requirements in the U.S. and other regions.”

Through its Securities and Fund Services business, Citi’s industry-focused experts provide investors worldwide with tailored solutions delivered through proven global platforms that feature modular, open architecture. With $13 trillion of assets under custody and the industry's largest proprietary network, clients can leverage Citi's local market expertise and global reach to extract value across the entire investment value chain.

Global Transaction Services, a division of Citi’s Institutional Clients Group, offers integrated cash management, trade, and securities and fund services to multinational corporations, financial institutions and public sector organizations around the world. With a network that spans more than 100 countries, Citi’s Global Transaction Services supports over 65,000 clients. As of the first quarter of 2011, it held on average $355 billion in liability balances and $13 trillion in assets under custody.

The full report is available at: or

Notes to Editors:

About the research

Create-research carried out two global surveys: one of 108 pension plans and another of 396 asset managers, pension consultants, third party administrators and distributors. The surveys were followed up by structured interviews with senior executives in 90 organisations in 12 major fund markets around the world. The contributors are spread over 30 countries, and manage a combined total of $29 trillion assets.


CREATE-Research is an independent think tank specialising in strategic change and the newly emerging business models in global asset management. It undertakes major research assignments from prominent financial institutions and global companies. It also undertakes advisory work for senior decision makers in reputable organisations across Europe and the U.S. Its work is disseminated through high profile reports and events which attract wide attention in the media. Further information can be found at

About Citi

Citi, the leading global financial services company, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management. Additional information may be found at

About Principal Global Investors:

Principal Global Investors is a diversified asset management organization and a member of the Principal Financial Group®, with expertise in equities, fixed income and real estate investments, as well as specialized overlay and advisory services. Principal Global Investors manages $235.3 billion in assets primarily for retirement plans and other institutional clients. Further information can be found at


For Citi
Nina Das, 212-816-9267
For Principal
Paula Chizek, 515-235-6016
Adam Lackey, 515-362-0482

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