Hotel Employees’ Provident Fund
Marinos Gialeli
• Invested assets: €235m 
• Total members: 12,500
• Structure: DC provident fund
• Established 1968

We make use of consultants at the various stages of the investment process including, for example, the selection of managers and their monitoring.

We also use them to conduct our ALM studies every three years and undertake our tactical asset allocation every six months.

We have been using the same consultant for these various tasks since 2006. But this is also partly down to our location. There are very few consulting firms in Cyprus.

Before we appointed our current consultant, we searched globally but the prices quoted for their services were very high. Our current consultant already had an office in Athens, meaning the fees they charge us for their services are reasonable.

However, over the last few years, more consultancies have opened offices in the region as they target eastern Europe and the Middle East.

We have been working in close contact with our consultant over the years, particularly where changes to our portfolio are concerned. He has been very helpful in making the right decisions for us – for example, we may be the only pension fund in Cyprus that moved a lot of money out of the country before the crisis hit the Cypriot banking system. In 2013, we are set to be down only 5%, which is good compared to other Cypriot pension schemes, which lost a lot more money.

Our consultant also proved to be a tremendous help to us in breaking down our portfolio, introducing us to new asset classes and undertaking due diligence although, admittedly, we have had little experience with other consultants.

One of the biggest changes in our investment strategy – the move from mainly active management to mainly passive management – was also undertaken with the help of our consultant.

A lot of consultants favour active management but an approach with a passive core and active satellites was more suited to our needs. We are currently in the process of introducing this new core-satellite approach with the help of our consultant.

For all these reasons, we feel that our appointed consultant has added value to our investment process, particular at the beginning.

However, I would still like to see more active engagement from our consultant on tactical asset management.

Merseyside Pension Fund
Peter Wallach
• Invested assets:  £5.95bn (€7.2bn)
• Members: 130,000
• Structure: DB
• Funding level: 76% (March 2013)
• Established: 1987

We use consultants at two levels of the investment process. We have strategic investment consultants who undertake ALM studies on our behalf and help us set our strategic benchmark and we have a framework of consultants that we use for manager selection.

These are different consultants – we never use strategic consultants for manager selection. We felt it was right to have a clear demarcation between the two parts. It avoids any potential conflicts between a strategic benchmark being created and selecting the managers to fit that benchmark.

We do not view consultants as gatekeepers. Because we go for open procurement, any investment management firm that meets our criteria can tender. In other words, we do not follow the traditional UK consultant model of them supplying us with a shortlist of managers.

We drive the process and select the long list and the shortlist according to our, rather than their, criteria. This is why, as far as manager selection is concerned, their role has more of a resource and support function.

We use consultants for manager selection in equities and bonds only – our internal team deals mainly with alternative asset classes, which are identified, selected and monitored in-house. They are, in turn, supported by organisations that undertake legal and operational due diligence for us, an area we are unable to tackle properly due to lacking the right resources.

Historically, we have tended to use the larger consultants but that is not necessarily by choice. The larger consultancies are probably more geared up to meet some of the criteria that we set when we tender. We are not wedded to this and there is no reason why this may not change in the future.

We last changed our strategic consultants two-and-a-half years ago. The framework of other consultants is refreshed every four years and we did that 12 months ago. But changing the consultant within the term of their contract is a rare event.

We assess our consultants by a mixture of qualitative and quantitative measures. As a public pension fund, price is a significant consideration, although it is not the ultimate determining factor – quality is more important than price. On the qualitative side, we are of the view that certain consultants have strengths in certain areas.

There has been variability but, in our experience, consultants have added value over time.

PNO Media Pensioenfonds
Jeroen van der Put
Executive director
• Invested assets: €4.3bn
• Members: 57,000
• Structure: DB
• Funding level: 105.2%
• Established: 1947

We do not use the advice of consultants in management selection. We employed them for manager selection purposes once in the past but felt there was not much added value.

One of the main reasons we go through that process ourselves is that we want to have the knowledge as to whether managers are good or bad. Only when we select and monitor them ourselves are we able to make plenty of comparisons.

In that process, we have also contracted other pension funds with whom to share knowledge. In fact, in that network, we see few pension funds who use consultants for manager selection, although some have outsourced all processes, including manager selection to one party, their fiduciary manager.

However, with pension funds now required to be in control of their investment process at all times and represent a good countervailing power to the markets, I do wonder whether the fiduciary management model can hold in the future.

We have a mandate from our board that allows us to choose the managers ourselves and report back on the process to our board. We start with a long list of managers based on what we hear and see of them in the market before we draw up a shortlist based on specific criteria. We delve deeper with the shortlisted managers before we appoint one of them.

ALM studies are sometimes undertaken in-house, while at other times we outsource them.

We often use our own actuarial consultants but also deploy the systems of an actuarial consultant in the Netherlands to help with some calculations. The consultant also produces a quarterly report on our risk management, funding level and tracking error.

For our real estate and infrastructure investments, we have appointed a fiduciary manager who is responsible for selecting managers, monitoring them and terminating their contracts. Because real estate is less transparent than other asset classes, and we legally have to be in control of what we are doing, a fiduciary real estate manager adds value to the investment process.

In addition, we employ the services of another specialist consultant who advises us on our overlay strategy concerning swaps and currency.

We have had a longer-term relationship with both of these consultants. While we are happy with their services, at times we appoint another consultant to challenge the quality of their work.