UK - Active managers will find themselves out of pocket as moves towards liability-matched mandates force their fees down, Hewitt Bacon & Woodrow claims.
A number of pension funds have already placed mandates which require fund managers to produce a return better than the increase in liabilities.
The move is expected to hit active fund managers hard because these mandates do not require the same level of management, so they cannot demand the same level of fees.
Hewitt said so far “a handful” of its clients had put a total of £5bn into these mandates. But it expects this figure to have grown to £20bn by the end of the year.
Investment policy group chairman Kerrin Rosenberg said that over the next three to four months, at least 12 clients will put further money into liability-matched mandates.
Rosenberg anticipates that the shift could drive fund managers out of the market altogether.
He said: “This has quite profound implications for a number of fund managers, because by and large, the job that they want firms to do is a lower intensity, less active job.
“A lot of firms will look at this and say ‘I can’t charge much for this’, and feel that this is not a market they want to be in.”
One leading active fund manager said although Rosenberg might be right in theory, his views were “premature”.
He said: “In theory Hewitt is right, but liability mandates form only a very small part of the market at the moment.
“As we see more and more defined benefit schemes close, we’ll see more of them mature and this will become an issue over the next decade.”
The Pensions Regulator (TPR) has set out plans to use "new regulatory initiatives" with over 1,000 schemes as it aims to tighten its regulatory grip and boost member outcomes.
HM Revenue and Customs (HMRC) has announced it is delaying the provision of data that will enable pension schemes to confirm the guaranteed minimum pension (GMP) benefits to pay to members until the end of the year.
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