UK - Investment Solutions, a UK multi-manager division of Alexander Forbes, has attacked rival investment consultancies for what is says is abuse of the term ‘fiduciary management'.
The investment house is now launching itself into the UK fiduciary management space by delivering what officials say is the true definition of fiduciary service to defined benefit pension schemes: full outsourcing of investment decision-making and implementation to a consultant where assets managed against a liability benchmark, rather than any other pre-determined benchmark.
Chetan Ghosh, head of liability-driven investments at IS, argued, fiduciary management should allow pension funds to take advantage of market opportunities as they arise, but believes pension funds are not get real advantage from some of the services offered elsewhere in the market.
"Unfortunately, the term ‘fiduciary management' has already been abused as a result of the wide range of asset managers and investment consultants launching poorly differentiated services with the ‘fiduciary management' banner," said Gosh.
"We are absolutely clear that fiduciary management is a service where the investment manager seeks to improve the value of assets against a liability benchmark in effect managing the funding level of the scheme," he added.
Michelle McGrade, chief investment officer, reiterated the stance by suggesting that the outsourcing of just some responsibilities to fiduciary managers - in whatever guise - does not make it fiduciary management, but believes the larger pension funds at least have been reticent to make that move.
"What we are trying to do is what some of the big names wanted to do but it was very difficult for clients to hand over the whole pension fund," said McGrade.
"Called it implemented consulting, call it delegated consulting, they are doing discretionary management. But we call it fiduciary management when we are looking at the pension liabilities and trying to manage the assets to those liabilities.
"It is really specific to each pension fund and that can be very difficult. The big pension plans are not going to hand over their whole portfolio, but some medium-sized pension plans might. By handing over only a quarter of half of the responsibilities, funds do not help themselves. We think our service is closer to the Dutch model," added McGrade.
Investment Solutions is planning to target the smaller end of the UK pensions market and take the management of assets by matching them to a gilt proxy and monitor developments on a daily basis.
Assets will be divided into ‘protected' and ‘gross' assets, so liability swap-based assets and gilts are covered under the ‘protected' portfolio while equity-based funds support the gross portfolio.
"Pension funds do want their portfolios actively-managed, and this is versus the old balanced managed situations, where funds were market benchmarked. And the questions we have heard from client since the Lehman collapse was ‘why have I got equities in this quantity, why haven't I been tactically allocating away since the last three-year review," added McGrade.
Investment Services is a division of Alexander Forbes Group. The group's investment subsidiaries have £9.9bn (€11.75bn) in assets under management, of which £1.1bn is in the UK.