More UK local authority pension funds are reassessing benchmarks and consultancy services as well as looking to equities for better returns as a result of best value reviews.
According to Valerie Burdett-Callen of specialist consultants, Sector Treasury Services, investment managers have also lost some of their input as a result of asset/liability modelling (ALM).
“Years ago it would be investment managers that would be involved in looking at longer term asset allocation before benchmarks were up and running. But the actuarial profession has stolen the march on the investment managers by developing ALM studies”, she said.
“Liability studies are very useful in educating trustees about risk, but they don’t tell you how you should monitor the performance for your assets,” she said.
Currently, up to 10 local authorities are conducting best value reviews of their financial services - including some London borough councils - according to Burdett-Callen. She anticipates more pension funds conducting best value reviews in investment management in the next couple of years.
“[ALM studies] tend to be bullish on bonds and although in the last couple of years that might have been a very good strategy, in the longer term its not been. I think that pension funds are more convinced that equities are going to deliver the longer term superior return. “
All UK local authority funds will have to show compliance with the best value regime by 2005.
By Madhu Kalia
Industry Voice: Sponsored by Eaton Vance
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