UK - Most fund managers feel that longer-term mandates would change important aspects of how fund management houses work, new research shows.
A study carried out by Hewitt Bacon & Woodrow found that around 93% of fund managers felt that long term mandates would change key aspects of fund operation.
About 75% of managers surveyed believed that investing for the long-term would result in a greater dialogue between fund managers and investee companies while 72% felt that longer-term mandates would necessitate different risk measures and models. Around 80% thought that investing for the longer-term would give them greater freedom in portfolio construction.
The research was carried out in response to recent government thinking around the need for a more long-term approach to pension fund investments.
Andrew Tunningley, head of UK investment consulting said: “The government are making no secret of their desire to encourage longer-term approaches to pension fund investment. Their hope is that this will stimulate a more informed and influential dialogue between institutional investors and companies in which they invest.”
The findings show that 82% of fund managers believe longer-term mandates would radically overhaul how fund management houses currently work, forcing fund management houses to become more flexible in providing bespoke solutions for clients.
Tunningley said: “The feedback from fund managers suggests that such a move would require them to increase the dialogue with their pension fund clients to provide truly tailored services to match each client’s different liabilities and perspective on risk. Working to a longer-term mandate will afford them the flexibility to engage more with companies.”
The research also revealed that 72% of managers recognise that longer-term mandates would necessitate different risk measures and models, in particular to make a stronger connection with funds’ liabilities rather than index benchmarks.
Fund managers also welcomed performance related fees, with 68% believing that this arrangement would be appropriate if longer term mandates were adopted, forcing a closer alignment of the interests of the fund and the interests of the fund manager.
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