EUROPE - European pension funds are increasingly bypassing consultants and approaching multimanagers directly for specialist mandates.
Guy Davies, co-chief executive of MM Asset Management, said a number of pension funds on the Continent were taking in-house decisions to go with the multimanager approach, rather than seek advice from consultants.
“Unlike the UK, where consultants have tended to be the gatekeepers of assets, in Europe they do most of the work in-house,” he said. “So there are huge opportunities there. Increasingly we are seeing a lot of specialist mandates, for example Far East, Japanese equities. It’s very different from the UK and the question is forming the right partnerships.”
Stephen J Delo, managing director of Escher UK Asset Management, and chairman of The Association for Institutional Multi-Manager Investing (AIMMI), said in the UK, the manager of managers concept was still pushing for wide-spread acceptance.
Delo said one argument or “myth” against multimanagement is a perceived “double layer” of fees that are thought to make multimanagers more expensive, when in fact access to the pool of talent tapped into by multimanagers would be very expensive on an individual manager basis.
“We believe that trustees rarely appreciate the true cost of fund manager structures and therefore are unlikely to instantly appreciate the considerable cost efficiency of the manager of manager approach,” he said.
Any pension scheme looking to implement a specialist structure not only has to seek and pay for advice, but also select and monitor the managers - a costly and time consuming process, he added. Given the volume of assets multi-managers hold, any cost reduction that can be achieved from the underlying holding can be passed straight through to the pension fund - something smaller schemes - in the £25m-£250m bracket - would not be able to achieve singularly.
“The generic concept has to be accepted before we can sell our services to trustee boards across the UK,” Delo said. “The Pensions Act, which puts greater emphasis on trustee knowledge - that I think is going to push trustee boards more in our direction.”
He added: “We’ve got to retain consultants’ confidence. There is a tendency for short-term performance issues to change consultants’ way of thinking.”
Tony Earnshaw, managing director of Northern Trust Global Advisors, said demand for multimanagement from large pension funds was growing.
“In the past, it was the smaller schemes that used manager of managers, those with under £200-£400m,” he said. “This size has gone up... we are seeing decent sized mandates come from quite large schemes now and I think that’s a trend that will continue.”
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