Winning The Race For Institutional Alternative Assets

How asset managers can position themselves as the collaborative, steady partners institutions are looking for right now

by Linda York

Institutional investors are caught in a paradox. Against the backdrop of economic headwinds, many are feeling the pressure to protect portfolios from macroeconomic shocks while pursuing the returns they need to meet performance goals. New research from Cogent Syndicated’s US Institutional Investor Brandscape^® study by Escalent found that nearly two in five institutional investors (39%) consider economic slowdown to be the biggest threat to portfolio health, followed closely by inflation at 36%. To shore up portfolios against these threats, investors are placing greater emphasis on return-enhancing strategies, a shift evidenced by their growing appetite for alternative investments.

To understand the evolving behaviors and attitudes of senior investment professionals in the US, Cogent Syndicated surveyed over 650 investors managing at least $100 million in institutional assets in four segments: pensions, non-profits, defined contribution (DC) retirement plans and insurance company general accounts.

The findings show that, across the board, institutional investors are turning to alternative investments to enhance returns and manage risk amid market volatility. However, while this presents a key opportunity for asset managers, Cogent Syndicated’s research also highlights a tension in investor expectations. Institutions are seeking access to new asset classes and private markets, but they continue to prioritize qualities that are typically associated with long-standing investment partners, such as trust, consistency and stability. This places asset managers in a delicate position: they must demonstrate both innovation in investment offerings and the discipline and reliability institutional investors expect.

The Paradox Of Choice For Asset Managers

Institutional investors across pensions, non-profits, DC retirement plans and insurance company general accounts exhibit strong demand for alternative investments. In this year’s Cogent Syndicated study, investors indicated they anticipate a net gain in their use of private equity (41%), private credit/private debt (35%), infrastructure (31%), digital assets/cryptocurrencies (31%) and real assets/commodities (26%). Despite their conservative reputation, pension funds are among the most aggressive adopters of alternatives. Within this segment, 57% of institutional investors said they expected their organization to increase allocations toward private equity, a net gain of 47 percentage points.

However, while institutional investors are broadly diversifying into alternative asset classes, the qualities they value in asset managers remain consistent. To determine which factors are most important in driving asset manager consideration, Cogent Syndicated conducted a regression analysis using 15 individual brand attributes ranging from investment performance and fee structure to product innovation and thought leadership. In the aggregate, “being a company I trust” emerged as the strongest driver, followed by strong, consistent investment performance  and noteworthy organizational stability .

This relatively conservative mindset is also reflected in investors’ near-term plans for asset manager selection. Despite high interest in alternatives, most investors are (somewhat paradoxically) not planning any major shakeups to their existing manager lineups. More than a third (35%) of institutional investors told Cogent Syndicated they did not plan to add any new managers in the next 12 months and 36% said they planned to add only one or two.

These findings point to a complex competitive environment for institutional asset managers. On the one hand, institutional investors are looking for greater access to alternative asset classes such as private equity, private credit, infrastructure, digital assets and real estate. At the same time, they continue to evaluate investment partners against the standards they have long relied on. Specialized firms may be gaining traction due to their perceived expertise in private markets, but Cogent Syndicated’s research suggests that, in the long run, category-specific expertise may not be enough to win institutional mandates.

In practice, this means asset managers seeking to compete for institutional business need to walk a careful line. They must demonstrate they are equipped to help institutions pursue new sources of return in a changing market, while also giving investors confidence that they can remain reliable partners through periods of volatility. For firms that are able to strike that balance, the growing demand for alternatives represents an opportunity to deepen institutional relationships.

Bridging The Gap: Strategies For Asset Manager Discovery And Outreach

While asset managers face the challenge of signaling both innovation and dependability, there are steps they can take to position themselves as the partners institutions are looking for. To help asset managers better understand how to reach and engage institutional prospects, Cogent Syndicated asked institutional investors to identify the most effective communication channels for evaluating and selecting new asset managers and learning about unfamiliar firms. Across all four investor segments, in-person visits emerged as the preferred channel for evaluating and selecting new asset managers, with 41% of investors citing this method as their top choice. When learning about new asset managers, institutional investors place roughly equal emphasis on in-person visits (21%), asset manager websites (19%) and industry conferences (19%).

These findings suggest that no single touchpoint or communication channel can support the full process of attracting institutional investors and earning their consideration. Instead, asset managers should leverage a variety of channels and outreach methods to build brand consideration among prospective clients. According to the study, thought leadership, webinars, industry conferences and websites all provide opportunities for asset managers to explain their investment processes, showcase the depth of their research and establish credibility in areas where investors may be seeking additional exposure, such as alternatives.

How Institutional Investors Build A Consideration Set

Outside of direct communication from asset managers, institutional investors rely on an expanding set of sources to inform their decision-making. Investment consultants continue to carry significant weight, with 54% of investors citing them as their primary source of insight when considering asset class shifts. In addition, 35% of investors describe the recommendations of external consultants or advisors as extremely influential when evaluating new asset managers.

While investment consultants remain a key resource for institutional investors, they now sit within a much broader informational toolkit. When conducting searches for new asset managers, institutional investors draw on a range of investment databases. Meanwhile, nearly half (46%) said they used social media when engaging with asset managers or consultants, most often to hear about upcoming events (52%) and consume thought leadership (51%). Historically, few asset managers have leveraged social media to reach institutional investors. However, Cogent Syndicated’s findings suggest it could play a valuable role, especially when used to reinforce awareness built via other channels.

To determine the optimal marketing mix for asset managers, Cogent Syndicated conducted a derived analysis to identify the expected lift in aided consideration provided by specific types of engagement following initial exposure. On a derived basis, webinars and virtual or in-person conferences and events sparked the greatest lift in brand consideration at 39 and 34 percentage points, respectively. Conversations with asset manager representatives, podcasts and website visits also proved highly effective, each offering the potential to boost consideration by at least 31 percentage points. Talking, reading or hearing about a firm on social media after an initial exposure produced a smaller but still noticeable lift of 24 percentage points.

Artificial intelligence (AI) is becoming an increasingly important tool for institutional investors, too. More than half (52%) told Cogent Syndicated they were using AI in the management of their institutional assets. While automated report generation was the leading use case at 56%, investors also indicated they were using AI for due diligence (31%) and manager selection (26%). These findings indicate that AI is informing how institutional investors gather information, vet firms and decide which asset managers merit further consideration, a fact asset managers (and their marketing teams) cannot afford to ignore.

Asset Managers: Balancing Innovation With A Solid Research Foundation

As institutional investors expand their alternative allocations, asset managers should focus on finding the ideal combination of channels, messages and proof points to communicate how their alternative offerings can add value to an existing portfolio. The goal is to give investors a reason to look beyond the status quo without making new strategies and asset classes feel disconnected from the organization’s broader identity and investment approach. For asset managers promoting alternatives, the most effective positioning is to present those offerings as the natural extension of a solid research foundation rather than a departure from historical expertise. Asset managers must show they can offer investors access to new sources of return while also building confidence in their firm’s ability to steward their clients’ capital through changing market conditions.

Ultimately, winning the race for institutional alternative assets will depend on pairing sophisticated, cutting-edge solutions with a sustained commitment to reliable partnership and collaboration. That requires a deep understanding of institutional clients’ specific challenges, needs and constituents. Asset managers must prove they have the right talent in place to meet those needs, with the relationship management, service and support teams reinforcing the work of the investment team. Investors may be seeking innovative new offerings, but they still need to trust the people, expertise and infrastructure behind each mandate.