Professional Pensions spoke to SECOR Asset Management head of client advisory Kam Chang as part of an exclusive series of interviews with some of the finalists and winners of the UK Pensions Awards. This is what he had to say…
What have been your main achievements as an organisation over the past 18 months?
Performance matters and is always key to our service. We identified three ways in which we added direct value to the bottom line for our clients during this recent crisis, including: 1) clients' benefitting from strategic choices made by SECOR; 2) SECOR restructuring our downside protection strategies; and 3) clients and SECOR working together (with external investment managers) to deploy cash in April and May.
• Benefitting from strategic choices: As the Covid-19 crisis hit, two embedded strategic policy tilts paid off considerably on behalf of our UK clients: a bias towards nominal hedges (over inflation-linked) and significant unhedged foreign currency.
• Downside protection restructuring: Going into 2020, clients with sizeable equity allocations had downside protection strategies in place. These strategies act as a form of portfolio insurance, paying off when equity markets fall below pre-determined levels. These strategies gained in value during the crisis and we were able to act quickly by monetising gains on the equity derivative contracts in place. Overall, our strategy helped our clients achieve better protected funding levels throughout the crisis period.
• Working together on investment opportunities: As things settled down, we deployed tactically to areas where we can be compensated for being a liquidity provider in strategies such as merger arbitrage, convertible arbitrage and structured credit/CLOs. We also pushed our external investment-grade managers to take more credit risk.
What do you believe sets you apart from your peers and contributes to your successes?
Our unique selling points are best summarised by the following:
• Experience: Clients have access to our entire team which is composed of experienced investors and former in-house pension investment managers
• Quality: We seek to outperform net-of-all fees above agreed-upon liability-based and market-based benchmarks
• Independence: Our fiduciary management solution is an extension of investment advisory offering rather than a separate product driven offering
How has your business dealt with the challenges of Covid-19?
We believe in helping our clients successfully navigate their portfolios during and throughout the pandemic. This crisis was different from previous situations as everyone had to transition to a working from home environment. Given our agility and size, we seamlessly transitioned to this environment earlier than most institutional asset managers and advisors. We pivoted from weekly meetings to daily firm-wide market meetings with real-time market intelligence from our trading desk and insights from our daily interactions with external managers. We also pivoted with our clients, going from quarterly investment committee meetings to monthly (and in some cases weekly and daily). We moved fast and adapted to more real-time information while others were sorting out the transition to working from home - increasing our report frequency to provide our clients with the information required to make sound decisions during the crisis.
What are the key challenges facing your pension scheme clients at the current time and how are you helping them address these issues?
The years following the global financial crisis have seen consistent years of synchronised global economic growth and positive market performance across all asset classes, driven largely by central bank intervention. The recent Covid-19 crisis has not only further emphasised central banks' roles as market influencers but has also brought to light a debate over the winners and losers in a post-Covid world. Adding increasing regulatory scrutiny and reporting requirements, pension funds should consider the below relevant themes over the next five years:
• Rising yields
• Central bank put option / intervention
• Death of quantitative investing
• ESG integration while still seeking to maximise returns
• Real Estate investing post Covid-19
• Pension reforms and increasing regulations
How will you continue to improve your services to pension scheme clients over the coming year?
We will continue to focus on improving ourselves by seeking to enhance the satisfaction of our fiduciary clients. These areas include:
• Building out the second generation of investment experts: we look to develop and nurture future partners in the core investment and cultural values of SECOR.
• Robust reporting: we continue to refine our systems and increase levels of automation, which is much easier to do as they are proprietary in nature. Our attention to detail, in line with a true fiduciary mindset, is evident in our bespoke reporting and further supports our proprietary development of reporting systems.
• Investment innovation: as markets evolve, we constantly seek to assess and develop investment strategies to enhance return and/or mitigate risks. No two markets are alike, and we appreciate that innovation is necessary to continue to outperform versus a benchmark. In short, we seek to be proactive rather than complacent in our investment thinking.
SECOR Asset Management was shortlisted in the Fiduciary Manager of the Year category of this year's UK Pensions Awards. Find out more about the awards here.