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Outsource your investment management is my cry!

Let’s start off with something where protagonists fall clearly into one camp or another and for a multinational, in particular, it’s a key issue: How to manage the in-vestments?”

I support the view that investment management should be outsourced to the fund management industry (and no, I’m not acting as their Trojan horse), and that the focus of the pension group should be on asset strategy formulation, manager selection and monitoring, performance attribution and risk mangement and control.

Increasingly, the multinational is under severe competitive pressures, both in its local marketplace, as well as from “headquarters”. To manage any pension fund effectively takes up considerable management effort, so it is important that this valuable time is well spent and well fo-cused. We know from research the importance of asset mix in delivering return - but does it re-ceive sufficient attention?

Then there is the question of local resources and skill at the country level. Do they really have the investment expertise necessary today to manage bonds or equities in the global market? If they are that good, then they should be in the markets earning higher salaries! Do we wish our overworked management team to be worrying about the interest rate outlook and therefore the duration on the bond portfolio, when there are many fulltime market professionals trying to do the same thing, and often getting it very wrong?

And finally, the poor chief financial officer, with reduced resources, with internal auditors in the wings and worrying about the controls re-quired around any in-house dealing activity (this is a nightmare area having managed an in-ternational treasury centre myself!).

Does he have segregation of duties between dealers and settlements, plus sufficient back-up resources? Has he got a good system which tracks activity and en-sures robust control and risk management etc, etc? This is a huge (and hidden) cost of in-house management and at headquarters and ab-solute minefield for the head of finance - and it’s not even mainline activity! Who needs this?

So outsource is my cry -Mr CFO, you owe me!”

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  • QN-2546

    Asset class: Real Estate Equity Fund (non listed).
    Asset region: Europe.
    Size: Total CHF 600m, approx. CHF 100-300m per fund investment.
    Closing date: 2019-06-28.

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