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Pension funds reveal top ten success criteria

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  • Pension funds reveal top ten success criteria

EUROPE - A major new IPE research initiative reveals that pension funds place the strongest emphasis on asset managers' ability to deliver returns within stated risk parameters, the integrity of valuations and the accuracy of reporting, with softer factors such as client relationships and alignment of outcomes not far behind in terms of importance.

ESG and engagement issues were among the least highly ranked.

The findings, from the inaugural Pension Fund Perception Report, offer a comprehensive view of pension investors' thinking, with participation from pension funds in countries across Europe.

Participating pension funds with over €1trn in assets under management, and reporting on over 300 managers, were asked to rank the criteria they considered most important when it comes to the asset managers they appoint to manage their portfolios.

The funds considered a manager's ability to provide returns within the limits of the mandate to be most important, followed by the overall integrity of valuations and the accuracy of reports.

Adherence to the terms of the mandate was ranked fourth among the 26, while value of management fees rounded out the five most important criteria.

Of the 26 sub categories, participating pension funds ranked the top 10 as follows:

The ability of the asset manager to generate investment returns in line with risk parameters provided; Overall integrity of valuations (as measured by price sources, valuation tools etc); Accuracy of reports; Adherence to the agreed investment mandate; Value in return for fees paid; Ability of relationship manager to understand needs; Alignment of outcomes with expectations; Efficiency of trade execution; Ability to control risk relative to performance expectations; Ability to implement corporate governance guidelines.

Of the nine overarching categories, within which the 26 sub-categories were grouped, and averaging the responses, issues within the valuations and benchmarking category were most important, followed by those to do with risk management. Ability to implement corporate governance guidelines or proxy voting guidelines were the least important of the nine overarching criteria.

The least important individual criterion for respondents was the ability of a manager to generate additional income for the portfolios by securities lending, with the lowest number of funds recording this as relevant, while very few participants viewed a manager's ability to achieve 'best execution' of all portfolios managed on behalf of the client as important.

For more information on the Pension Fund Perception Report 2012 please contact Amanda Bartlett at Amanda.bartlett@ipe.com or on +44 20 3465 9343, or visit the Pension Fund Perception Report's website.

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