Good news for UK Pension Beneficiaries: Now let’s hope for a requirement that asset managers switch from Modern (?) Portfolio Theory to ESG asset evaluation models. – Hazel Henderson, Editor
Posted: 27 Feb 2010 08:31 PM PST
UK pension fund professionals representing aggregate assets of £115 billion explored fairer manager fee structures, and incentive schemes that align fund managers more closely with their clients’ interests, at a recent roundtable in London organised by the NSFM.
The conclusions from the debate are best put in the form of three actions that must be taken by funds (please see attached synopsis for more detail):
1. Make the assessment of incentive schemes at fund managers an integral part of the selection process, e.g. under the heading ‘alignment’.Pension funds and other asset owners need to develop a set of guidelines on what to look outfor(e.g. what are material levels of co-investment?)
2. Create a governance structure that supports patient performance assessment on the part of pensions funds, e.g. by moving frequent performance assessment of managers away from investment committees. The NSFM Fiduciary Duty group has done work in this area (http://www.sustainablefinancialmarkets.net/projects/fiduciary-duties/ ), and published a well-received paper.
3. Move the debate on sustainable fees further. Performance fees, and what constitutes ‘sustainable’ performance fees, are not at all well understood yet. Pension fund practitioners feared that performance fees really reward luck: for example, a rolling three-year performance fee, increasingly adopted in the market, is not going to consistently reward skill –assessing managers’ skill levels requires a longer time period than that, possibly spanning several market cycles.
