The acquisition of Ennis Knupp by Hewitt Associates, which will see the retirement of its founder Richard Ennis, is a defining moment in the investment consulting world, as clients demand the closer alignment of liability and asset management and greater attention to alternative asset research.
The combined entity of Hewitt Ennis Knupp will create one of the largest providers of investment consulting services in the world, with nearly $3 trillion under advice.
But the marriage is significant not just for its size – it reflects the changing nature of consulting services.
As clients, finally, demand risk and liability management services alongside asset advice, the nature of the skills and services offered by consultants is evolving.
Hewitt’s specialty has been its actuarial business and extensive expertise in managing pension risk, while Ennis Knupp is respected as one of the best investment consulting businesses in the US.
Retirement solutions leader at Hewitt Associates, Ari Jacobs, acknowledges that pension risk research has become enormously important, and an area where Hewitt’s strong actuarial skills have been focused.
“This is perhaps an area where independent shops didn’t have that same capability,” he says. “There have been changes in consulting. The whole idea of risk is a more prominent discussion, and different skills are required for that. We can talk both sides of the balance sheet.
“Ennis Knupp is a very well-respected investment consulting firm in the US and Hewitt is a broad human resources and benefits company, with some investment consulting and we saw this as an important opportunity for expansion.”
The Chicago-based Ennis Knupp has 167 clients, including large US pension and endowment funds, and employs 135 people across five major services: general consulting, global private equity, global real estate, opportunistic strategies and fiduciary services, which advises on governance and operational issues.
“As a firm we are very excited about Ennis Knupp’s client focus. They are hyper-focused on clients coming first. Culturally there are a lot of characteristics we felt were important in our firm.
“Ennis Knupp has many strengths: it has built a very good alternative asset advisory platform, including real estate, private equity and hedge funds, and a few others (which) are unique services like its fiduciary services business,” Jacobs says.
Ennis Knupp was founded in 1981 by James Knupp and Richard Ennis, current editor of the Financial Analysts Journal, who remains active in the firm, at least up until its acquisition.
Over the years Ennis Knupp claims to have championed investment innovations among its clients including more recently advocating currency as an opportunity for skilled active managers, and the introduction of universal asset allocation.
Now Jacobs says Ennis Knupp clients will continue to benefit from that investment innovation, but also from the pension risk work of Hewitt.
He says Hewitt has spent the past 18 months focusing on risk and has developed a dynamic investment strategy, where funds “are planfully reducing risk away from risky assets to hedging assets such as credit mandates”.
“It is looking at assets in tandem with risks and liabilities, some call it liability-driven investing, we call it funded-status focus. The asset-only side is far too often the only thing looked at,” Jacobs says.
Hewitt has been working on the idea of growing its investment consulting for some time and will continue to acquire consulting firms in the right markets.
The new entity, known as Hewitt Ennis Knupp, will also have an expanded research capability, with the investment research teams to be merged under Ian Peart, head of global manager research at Hewitt.
The president and chief executive of Ennis Knupp, Steve Cummings, will lead the integrated Hewitt Ennis Knupp operation reporting to Mary Moreland, Hewitt’s North American retirement and investment consulting leader.
The consulting leadership team will consist of principals from both organisations, including Bradley Smith, current leader of Hewitt Investment Group, and Russ Ivinjack and Steve Voss, principals at EnnisKnupp.
“We are bringing the organisations together very quickly but we won’t change the client teams. We’ll continue to look for opportunities we can provide as one organisation,” Jacobs says. “There is a lot of integration that will need to be done around manager research and selection.”
There is also currently a definitive agreement in place between the directors of Hewitt and Aon for Hewitt to merge with Aon Consulting, a subsidiary of Aon. The transaction is expected to close by November, subject to approval.