Pros and Cons of Managing Assets In-house

There are some considerable perceived advantages to in-house asset and investment management when it comes to pension funds and other shared company investments. Compared to outsourcing, it can often seem like an in-house approach gives a company more flexibility and discretion.

Is that really the case, and are there any potential pitfalls if you decide to manage assets in-house? 

Here we’ll take a look at some of the issues to consider concerning in-house asset and wealth management.
 

Economies of scale

When it comes to active in-house asset and investment management, very few schemes are large enough to enable active management. Instead, the tendency is to stick with index-tracking or fixed-income stocks. The minimum portfolio size to make active investment management a credible option will probably be well into the billions. This means that for all but the largest schemes, in-house asset management will fall short of a fully actively managed approach.
 

Finding and retaining staff

Even if your portfolio is large enough to justify having employees actively manage your portfolio internally, finding skilled and experienced people to do this can be difficult. Not only that, this is an intensely competitive environment, with the knowledge and know-how of high-quality asset management always in demand. 

Staff retention can be a real problem unless they are offered significant incentives to stay. This again makes it difficult for all but the large in-house pension funds to compete. 

Intelligent asset and investment management require high levels of knowledge and expertise. Without it, your fund could struggle to achieve the kind of results for which you might hope.

Different kinds of in-house management

Before a company decides to manage its assets in-house, it will need to determine the type and extent of asset management it will implement. At one end of the scale, it may employ in-house advisors rather than asset managers who ensure that due diligence procedures are carried out, with the actual management of assets outsourced.

At the other end of the scale, a company with a large portfolio of assets may employ an entire asset and investment management team. These would run the whole asset management process from deciding on strategy, allocating assets and picking individual stocks and bonds.

This kind of hands-on asset management is beyond the means of most companies.

Monitoring performance

If you employ an in-house team of investment managers, then that team’s performance will need to be monitored. 

How will this be achieved, and what will be the performance markers on which you base your judgement?

Structural issues

A major issue faced by in-house asset and investment management is that the fund they manage is, in effect, the team’s sole client. Compare this with a fund management company that runs assets for many clients with levels of profit that match. An in-house investment team is unlikely to have the resources to attract and retain the best asset and wealth managers.

A bespoke approach to asset and investment management

At Global Investment Strategy, we offer a completely bespoke approach to asset and investment management. Our team has extensive tier 1 level experience and provides a degree of expertise that few in-house teams can match. Here at Global Investment Strategy, we develop an investment strategy that meets your requirements and ongoing needs, offering a flexible and tailored approach to investment management services that can maximise returns and make life easier for your company.

Call +44 (0)20 7048 9400 or email info@gisukltd.com to learn more about what we provide.