UK - Pension schemes which use specialist fund managers are being urged to specify in their contracts the actual manager who will run the account.
The advice comes in the wake of the Unilever v Merrill Lynch Investment Managers case, which turned upon the issues surrounding the roles of individual managers. The case revealed that MLIM waited two years to tell Unilever it had changed the manager of its fund.
Law firm Hammond Suddards Edge is advising trustees to have regard for not only the reputation of the investment house they are employing, but also the reputation of the fund manager who might be managing the specialist account.
Hammond Suddards Edge head of national pensions Andrew Powell said: “It does not follow in many houses that if somebody takes over the account that they will follow the same view as the previous manager. If a particular star performer fund manager is key to the trustees, there must be a strong argument that it is incumbent on trustees to make sure the fund manager is the person dealing with the fund.”
Sacker & Partners partner Jane Kola supported the move for specialist managers, but added that investment consultants should warn trustees of changes in fund manager in both specialist and balanced accounts.
Kola added: “If the person dealing with the portfolio leaves and was a real hot-shot investment manager and had a lot of discretion, their replacement might not be such a hot-shot and the investment consultants should warn the trustees. Then the question should be asked whether it is worth staying with the whole house.”
But Eggar Trustees director Vernon Holgate responded: “Invariably trustees buy the house itself as the house is promoting itself as a specialist in a particular area of investment. It will also offer certain research facilities, processes, controls and management styles. But I wouldn’t seek to restrict an investment house from moving its personnel around because they can move people to the benefit of a scheme.”
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