EUROPE - The debate on the blurring of boundaries between asset managers and consultants over the issue of asset liability modelling (ALM) has intensified, with some consultants openly accussing asset managers of encroaching on their turf.
One independent consultant claimed pension funds only “partly” believed the results of the LDI products offered by the asset management industry, as they suspected they were designed to make money for the investment manager rather than the client.
RMC Risk Management Consulting senior consultant Johannes Engel said: “LDI is a way for the asset management industry to substitute the advice of consultants.”
ORTEC CEO Guus Boender said, while he was glad investment managers had people looking into ALM, the research groups of the investment managers were incentivised to make money for the investment manager rather than the pension fund.
Christian Elsmark, managing director at Fundquest Interational, a BNP Paribas company specialising in multi-management investment solutions, said his firm used external specialists when it came to giving advice on liability-matching.
He cautioned: “Pension funding is a global problem, but LDI solutions should not be seen as a one-size fits all solution. Differences in interest rates, inflation expectations, regulatory environments, and risk tolerances mean pension funds need to ensure the appropriate skills exist behind the marketing story of the LDI provider.”
Insight Investment distribution head Charles Farquharson suggested every business in the industry had been forced to reassess its role since accounting changes had made pension funds a more pressing issue for their corporate sponsor.
“Corporates tend to have relationships with investment banks, rather than with either consultants or investment managers, so you’re not only getting the corporates interested, but also the investment banks trying to do things that either consultants or asset managers would have done.
“As a result, both the consultants and the asset managers are looking at the landscape and saying, ‘well, if there are lots of people trying to play our game, are we sure what game it is we’re playing and should we be playing a bit of somebody else’s as well?
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