UK - The majority of UK equity managers are missing their targets according to a study by Mellon.
The study shows that over the last ten years there has been a significant shift by pension funds away from balanced mandates towards multi-asset and specialist mandates.
The research shows that many managers have had limited success in achieving their objectives in respect of a number of key specialist mandates. The study looked at the performance of UK equity and global equity mandates, against both benchmark and objective, over rolling three-year periods to the last ten calendar year-ends.
It found that in both cases, managers generally performed well against a benchmark, but much less well against their specified outperformance targets, before fees.
Over the most recent three-year period, to 31 December 2006, 56% of UK equity managers beat their benchmark, while this fell to 37% achieving their outperformance target.
It was a similar story for managers of global equity mandates. The majority of managers failed to achieve their target in eight out of the last ten periods.
The study found a negative correlation between relative performance (against a benchmark) and market performance, indicating that managers generally tended to do better in poorer market conditions.
Mellon Analytical Solutions’ publications and statistics manager Daniel Hall said: “Pension funds require a certain level of outperformance from their active managers in order to justify their fees. Our results suggest that funds need to select and monitor their active managers carefully to achieve the additional value they are looking for.”
This week's edition of Professional Pensions is out now.
Ben Gunnee reflects on 2018 and talks about the Fiduciary Management trends to keep an eye on in 2019
Lloyds Banking Group secured 630,000 new pension customers last year, according to its 2018 annual results.
Guy Opperman has rejected calls to speed up changes to auto-enrolment (AE) despite increasing pressure to boost contribution rates and overall savings pots.