UK - US global benefits consultancy Towers Perrin has hived off its UK fund manager research and selection business.
The new model sees the firm enter into an alliance with another US fund manager, Frank Russell, who will offer Towers Perrin pension fund clients a range of multi-manager products. Rival managers SEI were also tipped as possible contenders to handle the investment business. Towers will now focus on its core businesses, including actuarial, administration and human resource services.
Commenting for Towers Perrin, Alan Botterill, managing director, Europe said: Pension trustees who need active fund management should appoint a third party to make the manager selections on their behalf and to be fully accountable for the results. Now, more than ever, companies and trustees need to make the right strategic decisions about their pension assets and liabilities.
Towers Perrin was forced to rethink its strategy following a mass exodus of investment staff from its UK office. According to reports, the firm underwent an overhaul of its senior investment consultants in less than 18 months, culminating in the resignation of senior consultant Phil Tindall who joined IBM as in-house pensions consultant. The firm also lost John Conroy, former head of its investment practice and principle, and Mike O’Brien, who now heads Barclays Global Investors. As an emergency measure, following Conroy’s departure in August, Towers Perrin US partner Steve Bonner was drafted into the UK office for six months in a bid to boost the team. Towers Perrin had reached a point whereby its investment department was headed by Mark Duke, supported by Phil Garcia and Charles Young, who are all pensions actuaries within the group.
But the deal is likely to fuel debate around conflict of interest issues between consultancy services selling investment products. According to reports, pressure on revenues have driven consultants to eek out new profit streams. Multi-manager products can allow them to charge pension funds a lucrative basis point fee.
Recent months have seen a backlash by several high profile industry figures against the practice including Paul Myners, Alan Rubenstein (chairman of the NAPF Investment Council), Peter Thompson (chairman, NAPF), Trevor Nash (policy advisor, Department of Work and Pensions) and Andrew Dyson (managing director institutional clients, Merrill Lynch Investment Managers).
Aon Consulting is still set to go head with its new in-house multi-manager service. Last year, Mercer Investment Consulting joined forces with Attica Asset Management to introduce Mercer 360, a multi-manager package designed for smaller pension funds. Mercer’s head of investment strategy Andy Green said international firms, like Towers Perrin, are expected to have both investment and actuarial skill bases in-house.
Green said: “There is no reason why a consultancy firm shouldn’t be able to operate in both areas. But it’s up to all firms to determine where they want to be and whether they want to maintain or build their resources.”
But Watson Wyatt has denied rumours that it may set up multi-manager services within two years. Nick Watts, Watson Wyatt's head of European Investment Consulting said: Watson Wyatt has no plans to set up a fund-of-funds business.
Standard Life has increased exposure to risk assets in three out of five funds in its Active Plus and Passive Plus workplace pension ranges.
Some 48% of employers are unaware of the services or help they offer to members of their defined contribution (DC) schemes, according to Aon.
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