The €24bn Dutch pension asset manager Blue Sky Group (BSG) has hired the consultancy Lestrade to assist it with the due diligence of external managers.
The move forms part of BSG’s philosophy to outsource non-core business, according to head of portfolio management Rob Brand.
“Lestrade will initially perform due diligence on all our external manager mandates in liquid assets to get an overview of the operational risks involved and how these are managed,” Brand told IPE.
Lestrade is a small, Dutch-based consultant that advises several large pension funds in the country on external manager selection and monitoring.
“What Lestrade is going to do for us is to form opinions on governance and organisational risks,” explained Brand.
“These are things like IT security and checking whether an external asset manager always adheres to the ‘four-eyes’ principle when executing trades, and how this is being monitored. The eventual judgement on such matters will be made by our risk manager, however. So we remain involved in operational due diligence, but will have in essence outsourced about 90% of this.”
Lestrade will initially focus its efforts on scanning all of BSG’s existing mandates for liquid assets on operational due diligence issues, an operation which will be repeated every three years.
They will also be responsible for due diligence in new manager selections. “But at the moment we only have a couple of selection processes on-going, so initially this will not take a lot of time,” Brand said.
Focus on core business
Up until now, BSG’s portfolio managers have been performing the operational due diligence in addition to the investment monitoring.
“But such operational due diligence is not always on the top of their minds, and we prefer our portfolio managers to focus on their core business which is on the investment side,” Brand said.
“We have hired our portfolio managers to answer the question whether a manager is able to outperform the market, so we would like them to fully focus on this in their daily job. Also, the requirements from clients and regulators on operational aspects are becoming increasingly labour-intensive,” he added.
The hiring of Lestrade forms part of BSG’s philosophy as a “mid-sized asset manager” to outsource non-core activities.
Earlier this year, Brand told IPE about his firm’s decision to outsource the monitoring of part of its private real estate investments to external consultants.