This article was published in Pensions Expert, by BENJAMIN MERCER | September 10, 2020
Interesting article by Pensions Expert around investment consultant manager selection, with input from Roger Brown of IC Select. Pension trustees have an important, but difficult, role to play in the good governance of their scheme. As an industry, pension experts should strive for increased transparency and clear presentation of salient information across all areas of impact.
A generic search for headlines on the performance of active managers paints an unhappy picture. ‘UK active fund managers suffer bloodbath in 2019’, the FT recorded last year, the latest in a long line of unhappy tales for stockpickers.
Markets have since undergone profound change, however, and as Pensions Expert reported in April, high levels of dispersion in equity returns signalled the beginning of a period of volatility that should have allowed active managers to shine.
“IC Select is proud to have assisted the trustees of Civil Aviation Authority Pension Scheme with this selection exercise, one of 17 similar investment adviser selection projects for DB schemes in 2019-2020 ytd, totalling £13bn. Who said that Covid-19 has slowed things down!”
The Civil Aviation Authority Pension Scheme (CAAPS) has appointed BlackRock to run a £4bn fiduciary mandate for its growth portfolios.
Following a competitive tender process, the manager was chosen to plan and execute the asset allocation and manager selection across all asset classes in the portfolio for both the CAA and the National Air Traffic Services (NATS) sections.
This webinar presentation below looks at the importance of addressing Strategic Investment Objectives in the wake of Covid-19 and in line with the CMA Order which required DB trustees from 10th December 2019 to set clear objectives for their investment advisers, whether an investment consultant or fiduciary manager. We have split the recording into two parts i.e. the introduction and presentation, then the Q & A.
Introduction and Presentation
Covid-19 has put funding and covenant under pressure although it is something trustees can do little to influence. Therefore it becomes even more important to get the most from your investments and having clear and effective strategic investment objectives is an essential element in achieving this.
In addition, The Pensions Regulator's guidance says trustees should be reviewing their current investment and governance arrangements to ensure they remain appropriate to enable decisions to be made quickly.
TPR’s guidance recommends that schemes:
• State objectives that take account of the scope of investment services offered
• Use balanced scorecards to evaluate investment advice
• Understand that it is against the spirit of the order for investment consultants or fiduciary managers to set and measure their own objectives
What should these objectives look like, how will they be measured, how often and what happens next?
What You’ll Learn
• Regulatory background to the order to set and assess clear strategic investment objectives
• How this will work, for example the balanced scorecard, measurement and assessment process and the benefits for trustee boards
• How to ensure that all objectives are Relevant, Achievable, and Measurable
Suitable for - Defined Benefit (DB) pension scheme trustees, chairs, sponsors and other stakeholders
Martin brings 40 years of experience to the defined benefit (DB) investment governance specialists, having worked in previous pensions roles for blue-chip multinational companies. These include as global benefits director at Tetra Pak, head of pensions and benefits at Royal Bank of Scotland, and vice-president of pensions at DHL.
"The CMA Order for trustees to set Strategic Investment Objectives by 10th December 2019 for their investment advisers is a “game changer”.
The setting of clear objectives will result in trustee boards then wanting to measure success and judge value for money. At a time when covenant and funding are under severe pressure investments become more central and investment governance is something DB trustees/sponsors can improve. Research shows good governance can add 1-2% pa to returns.
Given the Covid-19 disruption there will be real benefits for Trustees starting this sooner than later. After all ‘What gets measured gets done’.”
If you are a member of the PMI, click here to check out the full magazine