Multinationals are increasingly co-ordinating their global pension fund investments from head office with more than half now exercising some form of centralised involvement – a figure which is expected to jump sharply to around three quarters in just two years time, according to a survey by consultants William M. Mercer.
Mercer says it also knows of multinationals that are going a step further in their global plans by creating single asset pools to manage investments for their pension plans world-wide.
The key areas where multinationals are looking to extend their involvement, the report says, are funding policies, investment strategy and performance monitoring.
Some 87% say they will consolidate global investment strategies in the next two years with three quarters noting that they will choose investment managers through corporate HQ.
Custody, however, has a relatively low priority it seems, with only 38% actively involved in any global policy at present and 68% saying they may be interested in doing this in the next two years.
The switch to a global defined contribution (DC) pensions policy also comes slightly down the list of priorities. Of those firms already exercising corporate involvement at a local level only 38% had any overall DC investment prerogative – a figure predicted to rise to 56% in two years.
“ There is clearly a growing interest in global co-ordination, with activity levels due to rise sharply in the next few years, “ says Robert Baker, European partner with Mercer.
Baker adds: “ Certainly, multinationals can gain significant benefits from co-ordinating their investment policies and manager selection. The buying power of a single, world-wide organisation can mean access to the best managers, for example, including specialist managers that would not normally be available, or affordable, to local plans.”
The report also notes that until now US and non-US multinationals had shown a similar willingness to devote staff to global co-ordination – just over half in each case.
However, over the next two years 72% of US multinationals that do not currently oversee local investment activities expect to start doing so. Among non-US multinationals – primarily European – the corresponding figure is 39%.
Multinationals’ still appear to believe that active management can outperform market indices, with the survey recording that 57% say they consider active management as having priority in their investment set-up, whereas only 17% cited passive management. 26% rated the two equally.
And 59% say they consider specialist managers more important than multi-asset managers, while only 21% plumped for the reverse.
The Mercer survey comprised 83 organisations, of which 48 were headquartered in the US, 38% in Europe (19% UK) and 14% elsewhere.