Zarker also contends that there will always be opportunities that spring forth from the investment performance troubles of some managers-and she encourages managers to keep tabs on the marketplace in order to identify potential takeover mandates. But is the VA market that Zarker believes offers one of the most robust growth opportunities across the subadvisory landscape.

Total VA subadvised assets are projected to reach $915 billion by 2014, representing a 3-year compound annual growth rate of 7.9 percent, compared to a 3-year CAGR of 5.9 percent in long-term mutual funds and 1.7 percent in retail separate accounts.

Notably, in a recent Cerulli survey, subadvisors rated VAs as the top subadvisory distribution opportunity. A few asset managers control a meaningful piece of the subadvised VA assets, yet the top 10 accounted for less than half (42.8 percent) of subadvised VA assets in 2011-positive news for managers outside the top-10.

Zarker also points to the subadvisory opportunities inherent in the fact that at many asset management firms, product development is focused on alternative and other investment strategies, such as global tactical asset allocation, emerging markets, and nontraditional income-oriented products (e.g., managed futures), that provide diversification and, in some cases, low correlation to other asset classes.

As managers build new and novel products, some are turning to subadvisors to access investment capabilities and track records that they do not possess. The percentage of total subadvised assets for alternative funds is 18.3 percent of assets, versus 12 percent to 14 percent for traditional asset classes. Commodities are the largest subadvised alternative category, with $14.7 billion in AUM as of 2011. Alternative allocation ranks as the second largest subadvised alternative category, with $9.3 billion AUM in 2011.

According to Zarker, the expansion of model separate accounts within unified managed accounts presents some opportunity for investment managers to gather assets in subadvisory agreements. But, she cautions that managers must understand the various platform offerings in order to identify meaningful opportunities.

"The urgency of examining profitability carefully is heightened by the overall flat-growth environment in the subadvised channel," says Zarker. "The costs associated with accumulating subadvisory assets varies by channel, vehicle, investment strategy, and relationship, and it does not appear that costs tied to the subadvisory business will decline in the foreseeable future."

She also stresses that subadvisors must be patient, as it takes time to build new products to scale. Many of the firms with whom Cerulli spoke target a breakeven point of two-to-three years for a new product. Those that have the patience to wait, managing an entire strategy-versus only a sleeve-may mean more revenue.

Subadvisors that maintain profitable relationships with sponsors will be discerning about which opportunities they select, often choosing established mandates over new products, but selectively pursuing carefully analyzed new-product opportunities.