Sovereign wealth funds, whose assets have now reached just under $5 trillion, are using their clout to make asset managers train the SWFs' staff, in a move that could in time put asset managers out of a job.
The consistent growth of SWFs has come despite falls in market values over that period. The countries behind the SWFs, many of them emerging market countries such as China and Russia but others including the US, have continued to pump these funds with money, typically from oil or other export revenues.
But SWFs are not content with outsourcing fund management services to asset managers, according to Mike O'Brien, global head of institutional business at JP Morgan Asset Management. O'Brien said asset managers were being forced to transfer their expertise to the SWFs.
O'Brien said that, in addition to providing SWFs with good investment performance, conducting research on their behalf, bringing them new ideas first and tailoring reporting to suit their needs, asset managers were expected to contribute to "intellectual capital transfer and training". He said: "The intellectual transfer is a challenge. Their expectation is that they will put their staff in your organisation, embedded in the business, with people on desks learning portfolio management."
The asset managers have no real choice but to comply with the wishes of these enormous clients if they want their business - even if they just end up being discarded by the SWFs once their expertise has been transferred.
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