UK - Small schemes take up too much time and money for fund managers to service economically, Barclays Global Investors has admitted.
And co-chief executive Andrew Skirton says fund managers are raising their passive and active management fees to discourage small schemes as they take up a disproportionate amount of time and resources.
Skirton said: “Smaller clients have been a focus of ours and the whole industry. It has been quite a challenge to figure out – we need to make a profit, we need to get the economics right.
“We’re in the business of delivering, very dependably and at a competitive price, the returns our clients want.”
One consultant – who declined to be named – said: “BGI has very clearly made the decision to move away from the smaller end of the market – but someone has to provide these services.
“It is fair enough that it has taken a business decision to only really work with large clients, but it is quite a snub to small clients.”
Earlier this month schemes and consultants attacked BGI for raising its annual passive management fees from £5000 to £15,000.
Clients which refuse to accept the increase will instead have a reduced web-based service that contains limited detail on their investments and no access to a human liaison.
Simon Eagle of Willis Towers Watson says that, based on his work for Royal Mail, well-designed collective defined contribution (CDC) funds would be viable for some other UK employers too.
Bhavin Shah continues Newton Investment Management's series of DC columns with a look at how schemes can meet the challenges of providing income in a low interest rate world
Richard Wohanka is to chair The Pension Superfund's trustee board, working alongside professional firm 2020 Trustees to safeguard members' benefits.