The Investment Consultant
Not to be confused with retail brokers, investment consultants are third-party firms enlisted by institutional investors, and to a lesser extent by high-net-worth individuals, to aid in the following: devising appropriate asset allocations, selecting investment managers to fulfill these allocations, and monitoring the chosen investment managers' services. An investment consultant might be hired by a client to assist in one or all of these functions depending on certain variables, such as the client's size and internal resources.
As an example of the part that investment consultants play in the investment management game, let's say GM's pension fund is looking to invest $50 million in a certain security sector (say, large cap value equities). GM hires Wilshire Associates, an investment consulting firm, to help it find a large cap value manager. Wilshire will go out and search for the best managers in the sector and, one month later, will come back to GM with three recommendations. GM will review the three firms and then pick one. After GM makes its decision and the $50 million is handed over to the chosen investment manger, Wilshire might also monitor that manager's investment decisions.
True intermediaries, investment consultants have become increasingly important in the past 10 years as a result of a rise in the number of different investment product offerings.
Some of the biggest names in investment consulting:
- Frank Russell Company
- Wilshire Associates
- Mercer Investment Consulting
- Watson Wyatt Worldwide
- Callan Associates
- Barra RogersCasey
- Evaluation Associates
- Capital Resource Advisors
- Ennis, Knupp & Associates
- R.V. Kuhns & Associates
- Hewitt Investment Group
- The Marco Consulting Alliance
- DeMarche Associates
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This article is excerpted from the Vault Career Guide to Investment Management.
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