A group of Europe and US’s largest and most innovative pension funds have joined forces to create a prototype investment mandate competition to spur asset managers into looking at how responsible investment and outperformance can be delivered to pension funds over the long-term.
The pension scheme consortium, led by the UK’s Universities Superannuation Scheme (USS) and Canada’s Ontario Teachers Fund, launched the mandate competition last month at a conference entitled ‘Beyond SRI’ organised by the Royal Institute of International Affairs in London.
The funds say the initiative has been prompted by a growing consensus that traditional investment approaches are not working, either for end beneficiaries of pension schemes or investee companies. Nonetheless, the schemes acknowledge that there are limits to what any one pension fund or fund manager can do about the situation.
The prototype mandate, which could be set at several billion euros, will, the funds believe, generate significant debate and work in the area of sustainable investment and long-term returns.
The funds have also not ruled out investing money in a similar experimental fund if the outcome of the beauty parade is interesting.
Sir Graeme Davies, chairman of USS, commented: “What trustees need are creative and talented specialists to suggest alternative measurement methods and performance systems that would address the short-termism problem and simultaneously have a positive effect on corporate governance and SRI concerns as well. “After all, which trustee would be wedded to a benchmark if it was going to fuel the next bout of irrational exuberance with the boomerang effect on schemes members and sponsors that we can now predict.”
The initiative is also being supported by investment consultants Hewitt Bacon & Woodrow.
Full details about the competition will be published on the USS website on March 3, at: www.usshq.co.uk.