The question of whether the asset management market is working for pension funds and other investors, as the UK Financial Conduct Authority (FCA) is asking, was a theme at the UK pension fund association’s conference in Edinburgh. An overview of the motivation for the regulator’s investigation and the next steps was given by Tracey McDermott, interim chief executive at the FCA, who said that, while asset management was “one of UK’s success stories”, there is “no room for complacency” and the market study is “a serious and wide-ranging exercise”. The FCA’s next steps include a survey of institutional investors to get a picture of how purchasers of asset management services view the market, and “a comprehensive programme” of international comparison work, McDermott told delegates.
Chris Hitchen, chief executive at RPMI, manager for the UK’s £21bn (€28.9bn) Railways Pension Scheme, welcomed the FCA’s study, saying he was “filled with joy” at the prospect of its helping pension schemes. He suggested pension funds themselves could take steps to cut costs, but he also argued that asset managers were the key to ensuring schemes got value from the market. “Fund managers are where the resources are, where the pools of assets are,” he said. “And most trustees in the room are probably looking to their asset managers to be their guardians in the market.” Picking up a recommendation from the Kay Review into short-termism in the equity markets, Hitchen suggested all agents in the value chain, including asset managers, consultants and advisers, should adopt fiduciary duty and that this could bring about “a more balanced market”.
Asset managers and consultants also shared their views on the FCA study. Helena Morrissey, chief executive at Newton Investment Management, said it was a welcome development if it could improve the connection between asset managers and savers. Not including players such as independent financial advisers was a “missed opportunity”, however.
Andrew Stephens, managing director at BlackRock, was keen to stress the importance of differentiating between value for money and cost. He argued that trustees had a lot of control over costs and value given the decisions they took, but he appeared to suggest they were failing to prioritise and suffering from “inertia”.
The deficit among UK defined benefit (DB) schemes – £323bn, according to the latest figures from the Pension Protection Fund – formed part of the backdrop to a series of possible changes to the UK system outlined by PLSA chief executive Joanne Segars. She welcomed the FCA’s market study, questioning the pricing disparity in the asset management market that means almost identical global equity mandates can be bought for between 45 and 90 basis points. Other changes outlined by Segars included asset and liability pooling in the private sector, more action against underperforming schemes and greater flexibility in regulation, such as longer valuation periods. She announced the launch of a DB taskforce to explore potential solutions such as these.
Christiana Figueres, outgoing executive secretary of the UN Framework Convention on Climate Change and a key broker of the Paris agreement, told pension funds they needed to get their act together and intensify the shift away from carbon-intensive assets.
Having heard cases for and against Britain’s remaining in the EU, on the last day of the conference delegates heard the views of Yanis Varoufakis, the former Greek finance minister, who treated delegates to statements such as Britain “cannot escape the vortex of the disintegration of the EU”, whether it votes in or out.
•See Special Report, pages 51-61