| |
Newsroom /
Finance
/
Finance
/
Shaw Capital Working Management News Worldwide: Pension funds flock to investment comfort zone
Shaw Capital Working Management News Worldwide: Pension funds flock to investment comfort zone
Fiduciary management, where a pension scheme hands significant influence over its investment decisions to someone else, has grown exponentially since the financial crisis.
Baltimore,
Maryland,
United States of America
(prbd.net)
14/10/2011
http://www.efinancialnews.com/story/2011-04-04/pensions-flock-to-comfort-zone
Fiduciary management, where a pension scheme hands significant influence over its investment decisions to someone else, has grown exponentially since the financial crisis.
Asset managers, consultants and pension scheme managers agree that the crisis – and the losses that tipped previously solvent pension schemes deep into deficit – has shocked institutional investors into seeking much more from their investment advisers – although they realise they cannot delegate their responsibilities entirely, a change in aspirations compared with 10 years ago.
The recent appointment of Axa Investment Managers as fiduciary manager of the €2.5bn Ahold pension scheme is likely to be one of the largest mandates in the entire asset management industry this year, but it is only one of many fiduciary management mandates being awarded.
Nigel Birch, a researcher at UK market intelligence firm Spence Johnson, which researches data on the fiduciary management industry, said: “Half of all the mandates awarded in the last decade have come in the last two years. Competition is fierce.”
More competition
Mike Faulkner, managing director of P-Solve Asset Solutions, an investment consulting firm that has offered fiduciary management since 2001, said: “We are seeing tons more interest from clients, and loads more competitors.
“For the first time ever, the volume of clients looking for fiduciary management outweighs the clients looking for traditional consulting, and for the first time we’re seeing investors with more than £100m coming straight into fiduciary management, without having been a consulting client.”
Firms such as APG, a manager spun out of the Netherlands pension scheme ABP,BlackRock, the world’s largest fund manager, and Mercer, the biggest investment consultant, have spotted the opportunity and are offering their services as fiduciary managers.
The service can be expensive for clients – 10 times as much as regular investment consulting services, according to asset managers – and offering such a service may not be profitable for all managers.
Erwan Boscher, head of Axa Investment Managers’ fiduciary and liability-driven investment team, said: “It’s a package with a lot of services provided at a very tight price, and there is an intensive upfront fixed cost. The only ones who can do this are those with pockets deep enough to bear losses until they get scale.”
Edward Bonham Carter, chief executive of Jupiter Fund Management, said: “It’s a natural development for the really big houses, but it’s not for us.”
The chief executive of another asset management firm, one that does not offer fiduciary management, said: “I’ve yet to see the guy who makes money from this.”
Many asset management chief executives have expressed a lack of interest for this reason.
John Hailer, chief executive of Natixis Global Asset Management, one of the world’s largest fund management groups, said: “It’s not that easy to do, it takes a lot of due diligence and work.”
The need for scale has led to industry suggestions that fiduciary management would see consolidation, despite increased demand for the service.
Hendrik du Toit, chief executive of Investec Asset Management, said: “We offer multi-asset investment services, allocating between asset classes, but we don’t do fiduciary management.
“For a mid-sized, stock-picking focused firm it’s not on: it’s hugely administration-intense and relationship-intense, and if there’s a problem it’s a big problem."
Fiduciary managers look over their shoulder at Goldman Sachs Asset Management, which last year lost a €9bn mandate at Dutch pension fund Vervoer. Under GSAM’s management the scheme’s losses were 5.4 percentage points behind its benchmark, and Walter Brand, director of Pensioenfonds Vervoer, told Financial News at the time: “We appointed Goldman Sachs with the goal of outperformance for the whole portfolio – otherwise we would have just invested in indices.”
Hoping to minimise the reputational risk of losing money for a high-profile pension scheme, fiduciary managers want their clients to involve themselves in the investment decisions as much as possible.
More control
Birch, of Spence Johnson, said investors were keen to get involved. He said: “Pension funds came out of the crisis realising that they had been under informed by their fiduciary managers, and in particular that they were not made well enough aware of what could happen in any downturn.
“In future they will be looking for more control in what one investor described as a partnership, with understanding growing and pension scheme managers maintaining greater control.”
Michael Marks, chief operating officer of BlackRock’s fiduciary management business, which has 13 clients, including three in the UK, said: “The fiduciary manager should be helping trustees focus on the most important decisions, but the trustees own the decisions – they cannot delegate that.
“The benefit of the fiduciary manager is that it brings a more capital markets focus, and should be able to implement changes more quickly than the board of trustees.”
Transparency, and being a good cultural fit, is a way for a fiduciary manager to differentiate itself from its competitors. Marks said: “It’s hard for trustees to tell the difference between managers – 85% of what each one says is the same. It’s things like transparency that make the
difference.”
The world’s largest fund manager is determined to stay the course, regardless of the expense.
Marks said: “We know that, if we do a really good job for these funds, BlackRock will have a future. We know the move to fiduciary management is going to happen anyway, so let’s get in the right place for it. This is an opportunity for a fund manager to be a partner.”
About
Shaw Capital Working Management Tips & Articles: Working Capital Management ensures sufficient cash flow to meet obligations and expenses.
|