UK - Fund managers are offering pension schemes a poor choice on socially responsible investment, Watson Wyatt claims.
The consultant’s first SRI paper – Socially Responsible Investment for Pension Funds: Putting a Conscience Into Your Portfolio – blames a lack of resources at fund mangers.
The reason – according to the paper’s author, senior investment consultant Noel Grant – is that the contribution of SRI to a fund manager’s revenue and profit is still small.
He said: “SRI does not yet attract the most talented investment professionals – the key part of any process.”
But he said SRI could eventually be used by pension funds as a distinct investment style as part of a diversified portfolio, rather than as a concept which must apply to the entire portfolio.
He pointed out that SRI funds were not subject to the types of construction discipline and risk control that institutional investors expected and that fund managers relied too heavily on external company and market research in their processes.
Grant said that while these issues appeared to be “damning views”, fund managers should look to the future.
He believed that better teams and products would emerge as the investment case became stronger.
“If SRI is going to make an impact in the institutional arena, we need to consider the approach in a different way – simply as another investment style or strategy, in just the same way that we view value or growth investing,” predicted Grant.
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