UK - Fund managers are looking to forge stronger relationships with trustees in a bid to improve their understanding of scheme liabilities.
Closer trustee links would enable trustees, consultants and fund managers to set more effective scheme-specific benchmarks aligned to schemes’ triennial evaluations, managers argue.
Baring Asset Management head of institutional sales Jenny Segal said the approach was in response to “irrelevant” traditional benchmarks, which do not help a scheme manage its liabilities.
Segal said: “Investment managers should look at what a pension fund needs by the next triennial evaluation and work with trustees on fulfilling requirements for meeting liabilities.”
Threadneedle Investments head of institutional management Mark Stanley believes it would be helpful to increase the interaction between fund managers and trustees.
He said fund managers often find they are not part of the dialogue that sets investment benchmarks.
“I am not suggesting that we are going to take away the work the consultant does around asset liability modelling, but when they’ve done that and come up with a benchmark, that is where we should be part of the discussion.”
He added: “Fund managers are often criticised for not delivering what clients are looking for. But what we often find is that we haven’t been part of the dialogue that sets the objective in the first place. We are at an interesting stage in trustee/consultant/fund manager relationships.”
Mercer Investment Consulting, Hewitt Bacon & Woodrow and Watson Wyatt have all started to advise clients to use “liability benchmark” mandates – setting the fund managers the simple objective of beating scheme liabilities.
*A survey – carried out by BAM in March – found that nearly half of trustees were interested in a move away from traditional benchmarks and towards a targeted-return strategy linked to their next triennial evaluation.
Segal said: “Investors can be better served by a customised, long-term strategy, coupled with the risk-controlled ability to take short-term tactical investment positions.”
Most respondents in this week's Pensions Buzz do not think businesses should be able suspend AE contributions if in financial distress.
Former BHS owner Dominic Chappell has lost the appeal against his section 72 conviction and sentence for failing to hand over information to The Pensions Regulator (TPR).
This week's top stories include Marsh and McLennan Companies agreeing to buy JLT, and the home secretary calling for AE to be scrapped in a no-deal Brexit scenario.
Lesley Titcomb says the watchdog wants closer interactions with pension funds to spot problems sooner and act before having to use its more stringent powers