UK/EUROPE - The investment consulting industry has split into two distinct camps over selling manager-of-manager products.
As Aon Consulting goes full steam ahead into selling its own manager-of-manager service and Mercer Investment Consulting sells Attica Asset Management’s product as a preferred provider for its Mercer 360, global consulting firms Watson Wyatt and Hewitt Bacon & Woodrow have confirmed that they no plans to launch a multi-manager service.
“Watson Wyatt currently has no intention of launching a multi-manager/fund of funds service.
“We have adopted the implemented consulting approach instead which allows us to develop customised programmes in partnership with our clients; this maintains our alignment of financial interest with them, whilst retaining our independence,” said Roger Urwin, global head of investment consulting at Watson Wyatt.
“Watson Wyatt has no intention of launching a multi-manager service. This is something which is frequently repeated in the media but it is simply not the case,” added a Watson Wyatt spokesman.
Nick Fitzpatrick, global head of investment consulting at Hewitt Associates has also confirmed that Hewitt Bacon & Woodrow has “no plans” to launch a product in the UK market.
The controversy over consultants selling manager-of-manager products has heated up recently and many people in the industry view consultants who offer this service as having a conflict of interest when advising a pension fund on one hand and selling an investment product on the other.
Aon, however, claims to have addressed this conflict issue by creating a unit called Aon Asset Management.
The UK service, which Aon plans to extend to continental Europe, combines advice from Aon’s investment consulting arm with manager-of-managers pooled funds to be provided by the newly formed Aon Asset Management.
Adrian Swales, Aon’s chief executive of investment, said: “Aon IIS offers pension schemes access to our very best advice, combined with the implementation of that advice.”
In August 2001, when IPN’s sister publication Global Pensions first reported Aon’s planned manager-of-manager launch, Aon Consulting’s investment principal Chris Erwin said that the marketing arms of the consulting side and the manager-of-manager side will be combined and that existing consulting clients will be targeted.
Any firm in the UK, under FSA rules, can manage conflicts of interest in several ways including by disclosing the conflict to their clients.
Therefore Aon can target its own clients as long as it discloses the potential for a conflict of interest.
Aon is reported as having about E1bn worth of pension fund money already committed to its manager-of-manager product, but Swales declined to comment on how much of this has come from tying up existing clients.
Aon has conceded that it will not launch the product in Denmark due to the conflict of interest.
In August this year, consulting firm Towers Perrin partly exited the UK investment consulting business in favour of an alliance with Frank Russell to promote Russell’s manager-of-manager services. The departure, according to Towers Perrin principal Mark Duke, was partly due to a recognition that to produce its ownmanager-of-manager product would lead it into a conflict of interest with its consulting services.
Frank Russell has also been criticised for having consulting and manager-of-manager arms and several pension funds have said that when they invited Frank Russell’s consulting arm to advise on a specific mandate, Russell attempted to sell them its manager-of-manager product.
SEI Investments, a long-term competitor of Frank Russell, sold its consulting arm in the late 1990s to avoid having a conflict of interest.
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