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Special Report

ESG: The metrics jigsaw

Sections

The managers who came in from the cold

Welcome to ‘Off the record’. In the first appearance of this new regular feature in IPE, we give the views of those who responded to our e-mail questionnaire, which this month looks mainly at the practice of ‘Cold calling’ of pension funds by asset managers. If you would like to participate in future surveys, please let us have your e-mail details by e-mail to: info@ipeonline.com. The survey responses are on a totally confidential basis, with neither your name nor that of your fund disclosed at any stage.
Who gets cold calls from asset managers? Practically everyone it seems, with just 7% of respondents saying they do not receive cold calls. Sadly, from the investment managers’ standpoint, these virgins’ details are under lock and key.
But for the majority of pension funds who have long lost their virginity in this respect, the cold call can feature in their lives quite prominently. One says their fund receives up to 400 calls a year, while 10% reckon that they can get anything from 50 to 100 calls. Over a quarter of funds replying say they get between 30 and 50 per year. While for nearly a third of funds the cold callers strike more bearably, somewhere between five to 15 times.
Though most funds are categoric that these calls are unwelcome, around a quarter welcome these calls even though unsolicited. Despite this, pension funds are split in that three out of five say they always took calls , with over a half declaring they only took them if they knew the group involved. A small number were frank and said it depended on their work load or other circumstances, with one adding: “We should know who is out there in the marketplace and whether they are worth considering if we require an additional or replacement manager. Sometimes the consultants can be rather slow to give firms a rating.” Another who is positive about cold calls points to a call that resulted in a relationship “as the manager had an innovative solution”, but even he concedes that this is a very rare occurrence.
Only one respondent admitted to telling asset managers that they would ring them back, but then did not. What is a little more likely to happen is that someone else would be designated to ring back and get the details. One fund says “I try to be polite. Our message is ‘Don’t call us, we will call you if what you are offering is of interest to us’”. In the words of another: “We always take them in order to say ‘no thanks’ as quickly as possible!” Another ploy is to refer them to the funds’ consultants, as a quarter of respondents do. Why buy a dog and then bark yourself, would seem to be the obvious philosophy here. A ‘with-it’ fund refers cold callers to its web site.
One manager, who does not think cold calling works, paradoxically, does send a fax asking for the group to explain what is “special or worthwhile enough for us to talk to them”.
In the hopes of uncovering seamy tales of graft by asset managers to gain appointments, IPE asked what was the most unusual thing a manager had done to inveigle their way in. Boat trips, paid for flights to Japan, turning up unannounced claiming fictitious appointments were among the wheezes used to curry meetings.
But some pension funds expressed their ire at the treatment they receive: “Pressuring me, by saying they knew me for a longtime”; “from the calls I get, it is safe to say that some assistants are more than impolite”; “turning up unexpectedly and claiming they had already arranged a meeting”; “just popping into the office”; “bluntly, call without introducing themselves”. Obviously not appreciated.
But to be helpful, we did try to ascertain what methods the funds felt actually works when managers make their approaches . A letter or fax was appreciated by nearly two thirds, twice the number that found a phone call acceptable. Though there is more than a grain of truth in the observation from a fund manager that “the usual material sent is not what I like to read”.
Over three quarters reckoned conferences work as a contact point, with some clearly liking the more technically oriented ones, perhaps indicating those promoted by the asset management groups themselves. As to social occasions, including presumably sponsored hospitality, outings and the like, these were seen as a successful method by not quite two thirds of respondents. So the message is pretty clear, managers seem to prefer meeting on grounds where there could be educational, rather than just mere socialising or marketing talk on the phone or by mail, though none of these approaches can be disregarded. As to the question, does cold calling work?” Three quarters say a definite ‘no’. A number say yes, but with caveats: “Hardly ever”; “yes-but only in the sense of increasing your awareness of the firm”; “yes - but in less than one out of a 100 calls”.
We allowed pension fund managers, the luxury of expressing their ‘truer thoughts’ about asset managers as a class. We asked if they associated ‘pushiness’ with asset managers. Some pension funds, in the interest balance responded ‘sometimes’ or commented that it varied between groups, but practically two thirds plumped for the simple ‘yes’. An even a stronger response, around 80% who felt that ‘marketing hype’ could be a characteristic of the genus asset manager . Over 50% reckoned that they were guilty of resorting to jargon. But to the point here is the comment from a pension fund manager “I should know it and be able to cut through the crap”.
Poor after sales service, was only commented on by 15%, and on the more serious charge of ‘lack of professionalism’, only 10% felt this applied, and there were some reservations among these res-ponses.
What can be regarded as probably the best overall ‘score’ relates to the question that must often cross the minds of those listening to investment managers firms’ presentations: ‘Are they honest about themselves?’ While not one respondent went so far as to say managers were ‘always’ honest, nearly three quarters reckoned they are ‘mostly honest’ in presentations. But there is a sizeable group who feel that they are ‘rarely honest’. Well performance did slip in, but just sideways, as it were, in that we sought views about global investment performance standards -would this be positive for the market? Nearly 75% thought it would be, with the remainder not agreeing.
We did ask who impressed them most as asset managers and they could nominate up to three. About half did not respond, but those that did mentioned nearly 50 different managers - those most frequently mentioned and it was an equal number of times were JP Morgan, Putnam, State Street, Capital In-ternational. Ranking behind them came Alliance Capital, Fidelity, Fischer Francis Trees & Watts, Henderson, Indocam, Morgan Grenfell and T Rowe Price. The US houses clearly have it.
Two pension funds of banks nominated their own inhouse asset management company. Is this a case of misguided loyalty, or just knowing nothing better?
Last thoughts...
For those readers raising their eyebrows at the existence of another survey in IPE, spare a thought for those pension funds who are unfortunate enough to be ignored. As one prominent European pension fund manager remarked recently, “What would pension fund managers do without surveys? Why they would wander around like lost souls in the desert.” Quite.

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