High frequency trading of pension fund investments is reducing the value of scheme members' pensions, the Railways Pension Trustee Company chief executive says.
Chris Hitchen, who also heads up the Railways Pension Scheme investment and administration division RPMI, said profits made from the high turnover of equities by asset managers came from the pension benefits of the scheme's 340,000 members.
He said: "There are some activities which take value out of the chain and I do think there's quite a lot of overtrading going on in the stock market.
"Apparently it leads to market efficiency and better price determination, but if people are making profits out of it, where are the profits coming from? It seems to me ultimately that they are coming from my members and I do worry about that."
The Railways Pension Scheme is one of the largest schemes in the country with assets of around £17bn.
Hitchen, who also sits on the advisory board of Professor John Kay's government-commissioned review of UK equity markets, joined calls from other institutional investors over the functioning of equity markets.
He said short-termism from asset managers was driven by quarterly benchmarking of pension scheme investments.
"Do we give them the right instructions on what we want? Do we unconsciously give them a short-term framework to operate in?
"If I listen to the asset managers they feel they're on the hook on every quarter," he told a conference yesterday. "It's partially about the benchmark they're given.
"If you ask them to beat the All-Share then what is the asset manager going to do apart from picking some stocks that will beat it tomorrow and the day after that. It's quite hard to say, I'm going to try and beat it over ten years."
The Kay Review is due to publish its final report later this year.
PMI president Lesley Alexander and the institute's immediate past-president Lesley Carline talk about the challenges of Covid-19 and the opportunities and challenges the industry faces in the future.
XPS Pensions posted a 9% increase in revenues during the six months to 30 September – a rise driven by a number of large client wins.
Here they are - the winners of the 3rd annual Women in Pensions Awards...
Chancellor Rishi Sunak has warned that the UK’s “economic emergency has only just begun”, as he revealed that the Office for Budget Responsibility (OBR) has forecast the economy will contract this year by 11.3% - the largest fall in output for more than...
The UK’s cumulative excess deaths figure for 2020 is higher now than at the previous peak of 64,600 recorded during the first wave of Covid-19, the Continuous Mortality Investigation (CMI) says.