Hewitt poll finds backing for long-term mandates

UK – Hewitt Bacon & Woodrow has surveyed asset managers and found widespread support for long-term mandates among UK asset managers.

Seventy-five per cent of the 57 managers polled said long-term mandates, of up 20 years, would lead to “greater dialogue” between fund managers and pension schemes.

Hewitt, which was involved in last year’s long-term mandate competition organised by the Universities Superannuation Scheme, also found that 93% of respondents said long-term mandates “would change important aspects of how found management houses work”.

“Our research suggests a majority of fund managers feel that longer terms for investments would result in an approach to institutional investment , which draws in more skills and investment opportunities” said Andrew Tunningley, head of UK investment consulting at Hewitt.

Seventy-two percent of the polled managers said longer-term mandates would “necessitate different risk measures and models”, while 80% found the new type of investment would give them “greater freedom in portfolio construction”.

The new type of mandate would also “force” fund managers “to become more flexible in providing solutions for clients”, 82% of managers said.

The winning manager in the USS competition, Henderson Global Investors, said long mandates could provide opportunities to be flexible.

Andrew Fraser, director of global consultants at Henderson, said the company would “look forwards” to managing long-term mandates. But he added: “While the report says that managers would be ‘forced’ to a greater flexibility, Henderson thinks the changes would give the opportunity to be more flexible.”

Other findings from the survey include the idea that a change in mandate terms would necessitate different risk measures and models, with a stronger connection with funds’ liabilities rather than index benchmarks.

But 68% believe the new arrangement should imply the introduction of performance-related fees, with a closer alignment “of the interests of the fund and the interests of the fund manager”.