Asset owners want more control in mandates as tolerance for underperformance falls
Research by PwC shows there is now greater demand for “outcome-oriented mandates and customised portfolios” among asset owners (Greg Lovett/Palm Beach Post)
Asset managers must collaborate more with other managers within broader mandates as performance and costs come under increasing scrutiny, says Albertha Charles, PwC UK’s global asset and wealth management leader.
Charles says there is now greater demand for "outcome-oriented mandates and customised portfolios", with asset owners eschewing off-the-shelf strategies in favour of "deeper partnerships".
A growing number of investors also expect managers to integrate public and private assets into a single strategy, rather than treating them as separate silos, she adds.
Managers are expected to move away from individual mandates towards customisation, with "much more flexibility in how mandates are structured and delivered" for large asset owners, says Charles.
As a result of these expectations, managers are increasingly joining forces to manage broader mandates.
This can be seen in the UK's Local Government Pension Scheme pools, such as the $149bn Border to Coast Pensions Partnership, where specialist managers FountainCap and UBS Asset Management oversee China mandates within the pool's emerging markets sleeve.
According to March 2026 fund documents, UBS oversees 18.4 per cent of assets in the $2bn EM equity fund, while FountainCap looks after 13 per cent.
Meanwhile, the Wales Pension Partnership has implemented a more traditional multi-manager structure, with multiple underlying managers.
This includes two global equity funds, overseen by Russell Investments, and managed collectively by more than 10 individual underlying investment managers.
Both funds launched at the beginning of 2019 and, by last September, they together held more than $9.5bn, capturing both global and regional equity opportunities.
Other asset owners are appointing multiple managers for mandates that were previously handled under a single global contract, creating additional external opportunities.
In April, MandateWire reported that the $7bn LD Fonde had hired two high-yield bond managers. It selected MacKay Shields to manage an active US dollar-denominated mandate worth around $108mn and Capital Four to look after a euro-denominated mandate worth £60mn.
The new managers replaced T Rowe Price, whose single global mandate came to an end.
LD Fonde has signed new contracts with Mackay Shields and Capital Four for four years, with an option to extend them for up to seven years.
“Institutions want more control, more transparency and greater fee efficiency, which is changing what they expect from their managers”
Charles says that in manager relationships, institutions now want "more control, more transparency and greater fee efficiency, which is changing what they expect from their managers".
She explains: "In many cases, managers are not just competing for mandates, they are competing to remain relevant within [broader] structures."
Scrutiny is also increasing as asset owners become more willing to remove underperforming managers.
"Tolerance for underperformance is coming down," explains Charles.
Higher cost pressure
According to PwC, 60 per cent of institutional investors now say they would be willing to move away from an asset manager "purely on cost".
To thrive amid intense competition, managers are expected to have "a much clearer articulation of value, whether through performance, outcomes, or the role the manager plays in the portfolio," Charles says.
Asset owners are also using third parties to provide greater insight into the cost efficiency of portfolio decisions.
At the end of last year, Norfolk county council launched a search for benchmarking and cost transparency service providers, to support its own $7.5bn Norfolk Pension Fund along with other local authority pension schemes, including the $15.5bn Essex Pension Fund and the $5bn Lincolnshire County Council Pension Fund.
Cost is also being more explicitly factored into manager selection.
When it commenced a search for investment management services earlier this year, the UK's $37.6bn National Wealth Fund evaluated proposals using a 75:25 split between quality and cost.