Investment Consulting

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Investment Consulting refers to advising institutional and private investors on the entire investment process. Similar to the two original terms investment and consulting , it is a German made-up word , composed of English: investment for "investment" and consulting for "advice". In contrast, the German term “investment advice” refers to the investment process in companies. The term investment consulting is also to be distinguished from the narrower term investment advice within the meaning of Section 1 (1) of the German Banking Act (KWG). These are a narrower legal definition that is restricted to recommendations for transactions with certain financial instruments and refers exclusively to the German legal area.

tasks

In detail, the term investment consulting includes advice on the definition of the investment strategy (asset and liability management), its implementation by the investment organization, the portfolio structure and the selection of asset managers (asset manager selection) as well as the monitoring of investment activities ( investment controlling ):

  • The definition of the investment strategy includes the formulation of the investment goals of an investor , the analysis of risk capacity, asset and liability management and the determination of the asset allocation.
  • The definition of the investment organization relates to governance issues ( e.g. in the case of pension funds ), the definition of structural and procedural organization , in particular the investment process, as well as the definition of investment regulations and the associated specifications.
  • The development of the portfolio structure relates to the structuring of a mandate, the definition of investment guidelines and instruments, an investment style and the definition of a benchmark (e.g. an index).
  • The selection of asset managers includes the tender, evaluation, award recommendation and contract negotiation of asset management mandates.
  • Finally, the investment controlling integrates the analysis of return and risk, the monitoring of compliance with the investment guidelines, the assessment of the asset manager, the monitoring of the custodian bank and a comparison of costs and fees.

Typology

The investment consulting market can be roughly divided into two segments:

  • Investment consulting by asset managers such as banks. Here, the asset manager also takes on an advisory role, for example by creating an investment strategy. This constellation is often seen as problematic. Critics see a lack of independence from potential customers and a conflict of interest because the consultant also offers his own products.
  • Investment consulting by independent consultants who do not offer their own asset management or products in this area and see themselves as an “independent antithesis to the asset management industry”. The remuneration is usually based on an hourly rate. The consultants are in turn organized in their own umbrella organizations, in Switzerland for example in the SAICPF. Investment consultants are widespread in the institutional sector, mainly in Anglo-Saxon countries . The IC Research Institute provides studies and a database on investment consultants .

costs

There are different estimates of the costs of investment consulting. For Switzerland, for example, the costs are estimated at around 1.3% of the total investment costs of Swiss pension funds.

Individual evidence

  1. ↑ cf. Runge, Bastian: Investment Consulting in Institutional Asset Management. 2012. Bad Soden. Pages 43–49
  2. ^ A b Peterhans, Thomas: Investment Advisor: Does the Market Work? In: AWP Soziale Sicherheit, 14/2013, page 6. Online
  3. ↑ Swiss Association of Investment Consultants for Pension Funds Online ( Memento of the original dated December 31, 2013 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / www.saicpf.ch
  4. ^ IC Research Institute Online
  5. ↑ Skaanes, Stephan 2011: An Overview of the Swiss Pension System. Role of Investment Consultants in Switzerland. Presentation to the EPFIF, September 9, 2011. Online