MNOPF to reshape UK fiduciary landscape?
When the Merchant Navy Officers' Pension Fund (MNOPF) announced it was appointing Towers Watson as delegated CIO, the UK pension industry took notice. While the £3.3bn (€3.7bn) scheme may not be big compared with some of the Dutch pension giants, it is influential in the UK, especially with its appointment establishing Towers in UK fiduciary management.
In June, MNOPF made a further appointment to overhaul its governance structure, choosing Hymans Robertson as independent investment adviser. William Everard, chairman of the scheme's investment committee, argued they were at the "leading edge" of fiduciary management.
Andrew Waring, chief executive of the scheme, said the decision to appoint an independent investment adviser to act as an additional layer of checks and balances was a bespoke option he hoped would eventually become the norm in the UK. The idea of introducing such a role first emerged around two years ago. "It was very clear we needed this review, monitoring and advisory role. It provides some form of checks and balance," he said, distancing himself from previous statements by the MNOPF that Hymans Robertson was appointed to challenge Towers Watson. "We've chosen our CIO," he said. "We believe in their approach, we believe in their style and their philosophy, and we are very comfortable with it - so we don't need someone to come in and start arguing."
Hymans Robertson's role was to guarantee that advice offered to trustees was both reasonable and well founded. He said that, due to the importance of the CIO role, it was important trustees were "absolutely sure" they were being offered the correct advice.
Neither Waring nor Hymans Robertson board member John Dickson was entirely sure how the new role would work. They said either Dickson or one of his colleagues would report to trustees on a quarterly basis, with further meetings between Waring and Hymans Robertson likely on a more regular basis.
"I don't think either ourselves or Andy [Waring] are absolutely sure of the full remit of that role," Dickson said. He reiterated Waring's point that it was not their role to question Towers Watson, as it was agreed between the MNOPF and the consultancy that pension assets would be "managed as they see fit".
However, he stressed it was his role to make the scheme understood the implications of investment decisions, and potentially challenge them. Waring added that one of the reasons Hymans Robertson was selected was its lack of "pre-conceived ideas" as to how to approach the mandate. "They were very open to working with the trustees and Towers to develop the most effective check and balance system."
Discussing the search for an investment adviser, Waring admitted that there was a limited scope. "We were very clear that the entity that filled the role as independent adviser should not itself be offering fiduciary management services and should have no immediate plans to do so," he said, admitting that a change in future may be inevitable as the world evolved, but that the initial choice to bar any consultants involved in fiduciary matters immediately narrowed their spectrum. In the end, five companies competed for the mandate.
Dickson said the adviser was not "chasing the fiduciary prize" at present as that might create problems in a situation when the investment adviser could be seen to compete with the delegated CIO. Hymans Robertson still has to learn the ins and outs of the role with confidentiality agreements in place.
As to the success or failure of the model, Waring admitted that they were unsure quite how to judge it effectiveness. "It's going to be quite a challenge. They are not managing any money, so we are not going to be measuring any hard performance, as with the delegated CIO."
Waring reaffirmed that he hoped the model implemented by the MNOPF would soon become popular in the UK.