UK - Fund managers are bumping up the minimum threshold for segregated mandates in a bid to improve investment performance, a leading actuarial consultant claims.
Aon Consulting says five years ago leading fund managers would accept segregated mandates of around £20m. Now most are looking for a minimum of £40m-£50m.
Senior investment consultant Alvar Chambers said increased minimum briefs have been imposed by managers who are wary of taking on more assets than their teams can efficiently handle. “In the past, fund managers have grown by taking on clients indiscriminately.
“They have taken on a huge amount of assets, but their teams have struggled to cope and not been able to implement their strategies so well and performed poorly.”
Schemes which look to appoint a fund manager to segregated briefs below the new threshold are increasingly being asked to consider pooled funds as an alternative. The move could also lead to some managers seeking higher fees.
Fund managers’ focus on asset stability rather than expansion is underlined by weak equity markets and falling investment returns among the majority of managers.
Consultants point out that while some pension funds might expect fund managers to be offering more attractive fees as their own returns have fallen, they should be more concerned with the financial stability of their fund managers.
Watson Wyatt head of European investment practice Nick Watts said: “A long-sighted trustee recognises that the fund management business is having an extremely difficult time and the really important thing for them is the business platform of asset management.
“Most people are focused on whether their fund manager has a viable business. If we are in for a long bear market, you can expect some consolidation in the industry.“
PP has compiled a list of what to watch out for over the coming months.
Canada Life has signed a £351m bulk annuity contract insuring the pensioner liabilities of 2,510 members and dependents in the AA UK Pension Scheme.
In this week's Pensions Buzz, we want to know if you believe there is ever a case for combining retirement savings products with other savings products, and if the PPF levy for sponsorless schemes is appropriate for DB consolidators.