EUROPE - Andrew Thornton, chief executive at fund manager Internos, has criticised institutional investors that claim the fund management model is broken, yet solicit third-party capital to set up the same structures themselves.

"There's a natural desire for more control on the part of pension funds," Thornton told IP Real Estate. "They want to have more say in how the fund invests and for the investments to be driven in their own interests. It's understandable.

"What I have less sympathy with is investors saying the fund management model is broken, but then inviting investors to join them in what are effectively funds.

"I'm not talking about club investments, which are specific, one-off opportunities for investors to align interests. But I struggle when they replicate the fund model by inviting third-party investors to commit capital."

Although he did not name names, Thornton added: "There's nothing wrong with insurers, say, building fund management operations internally for pension funds within the group. But when they seek to attract third-party capital, I can't see a huge distinction between that and fund management.

"Managing a fund and managing a portfolio in a pension fund are very different jobs. A good fund manager requires specialist skills that aren't necessarily those of managers allocating to real estate in a pension fund or insurance company."

While he acknowledged pension-fund disillusion with returns on vintage 2006-08 funds, he declined to attribute culpability.

He said investors recognised they had been through an unprecedented crisis, and that even the most robust funds were not built to withstand that level of bombardment.

"When the market changed, some investors were looking for liquidity, and others, especially open-ended funds and multi-managers, were looking to withdraw," he said. "At the beginning, there was alignment - later, there was less. At the same time, banks' patience is wearing thinner."

Forecasting significantly more attrition among fund managers, he said those that would survive into 2014 would need to regain the confidence of pension schemes and other end-investors with a clear vision for their funds.

"Fund managers need a vision of what they want to build, and they need to think like CEOs - adding value, not just collecting rent," he said.

"They need to demonstrate their business has a future in order to attract people to it. Those who can do it will survive. But not everyone can just start up a fund.

"That's how it ought to be when you're handling significant amounts of pension fund money."