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Special Report

Impact investing


Consultancy to assist search for consultants

UK - A new consultancy service has been launched in the UK which is designed to advise pension funds regarding the selection of investment consultants.

Until now, it has been largely the investment consultants who have driven the pension fund arena and the direction pension funds may actually move in, but with the increasing pressure to ensure the most suitable firms are employed to help manage assets, it was noted there appears to few services scrutinising the practices and models consultants pursue.

IC Select has now been launched by Roger Brown, who was previously responsible for establishing the investment consultant assessment services of Blacket Research as well as spending time as Hibbert & Barrie, to try and fill that void.

Moreover, the firm has already assisted its first client, the Scottish Power Pension Scheme, in its search for an investment consultant.

"Historically, it has been very difficult for pension funds to analyse the consultant selection," Brown told IPE.

"They can obviously rely on the investment consultant for assistance on investments, and over the last year there have been a very small handful of pure tender consultants [launched], looking more at administration systems selections which provide the framework and how to go through the process.

"But no-one looks at the asset liability models, etc, and the vast bulk of business for consultants comes from whether [a pension fund should] have 60-80% in equities.
There is nobody who has looked at these models and asked where they will lead the pension fund, getting down to the detailed due diligence they do," he added.

IC Select is targeted only at UK pension funds but is designed to give trustees a due diligence process with high governance standards, as academic research now recognises 90% of the variation in a pension scheme's return is as a result of the investment consultants' advice, and just 10% is the result of managers selected.

Commenting further on the position of investment consultants in the market, Brown said conflicts of interest at investment consultants, particularly with the rise of multi-manager operations inside consultancy firms, is one aspect of the process his firm will watch closely.

"It is predominantly the major consultants who have gone down [the multimanager] route. And there are difference around the way they control conflicts of interest, but it is not a significant issue for pension schemes as yet because business, in terms of multimanager or implemented consulting, is still quite low. That said, there are a couple of consultancies which, as they grow, will have to deal with it," added Brown.

Officials at the Scottish Power Pension Scheme were unavailable for comment at the time of publication.

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