Pension funds prefer devils they know


Pension funds that are contemplating bringing in a fiduciary manager – a single firm to take on most, if not all, active investment responsibilities – are overwhelmingly more likely to employ a firm they already know rather than a newcomer, a survey for consultancy Aon Hewitt suggests.

Only 12% of 125 funds said they would bring in a firm they did not already employ.

In choosing among firms that already worked for them, 59% would go for their consultant and 30% for a fund manager.

The fiduciary management model, introduced to the UK in 2007, now accounts for between £50 billion and £60 billion of assets.

Although asset managers including BlackRock or Russell Investments are keen to enter the market, about 80% of UK pension funds that were planning to take on a fiduciary manager have employed investment consultants such as Aon Hewitt,Mercer or Towers Watson, according to a market survey last year by accountancyKPMG.

Sion Cole, head of client solutions at Aon Hewitt, who is responsible for its £6.2 billion fiduciary business, said: “Fiduciary management has to be built on a level of trust. What we’re seeing is that pension trustees are going out to market, assessing their options and then appointing someone they know and trust to do that job.”

Both pension funds that are clients of the firm and funds that are not were interviewed for the survey. Cole denied that consultants had been given fiduciary business without public tender, saying that pension trustees opened such posts to the market but typically chose to appoint a firm they knew.



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