GLOBAL – A new report from KPMG has revealed the tensions that exist between investment managers and pension consultants.
The report, co-produced with think tank Create, notes that the roles of investment manager and consultant have become blurred.
“There is a definite blurring of boundaries between investment managers and consultants,” it says. “Tensions between them have become inevitable: the only way in which investment managers can have the upper hand is through a solid track record, which many do not as yet have.”
It quotes an unnamed respondent to the survey as saying: “The boundary between fund managers and pensions consultant is blurring. The latter increasingly offer an asset allocation overlay.” Another said: “What pension trustees pay consultants is protection money, nothing else.”
The report says the shift away from balanced mandates is rapidly enhancing consultants’ role. But it warns that the change may not be permanent.
“The pendulum may well swing back towards balanced mandates, especially as pension consultants themselves come under fire, if and when the core-satellite model fails to deliver the expected results.
“Like investment managers before them, consultants may be the next victim of their own success,” says the report.
And the report is critical of the current pension trustee system. “The trustees’ approach to managing billions of pension fund assets started to creak as investment returns turned negative, exposing the true risks.”
The report says that despite its apparent sophistication and growth, it is still a small-scale operation at heart.
“Although it still remains a cottage industry in many respects, over-rapid growth concealed many structural weaknesses,” it says.
The report says many pension fund trustees and consultants did not realise how debatable was their decision to target the bulk of their assets on the potentially volatile asset class of equities. In the future, the report says, trustees will be more influenced by the branding of the investment manager than by investment performance.
Around 40% of respondents said the move away from defined benefit pension schemes to defined contribution plans was a key market driver in the next three years. pension schemes away.
The 54-page report polled the senior executives of 185 investment management firms in 20 counties, representing nearly 19 trillion euros in assets.