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Investment managers could offer more liability 'solutions', says IMA

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  • Investment managers could offer more liability 'solutions', says IMA

UK - The chief executive of the Investment Management Association (IMA) has speculated that investment managers might supply more solutions that address specific liability needs.

In the IMA's 8th annual member survey, Richard Saunders said investment managers were acting increasingly as wholesale providers rather than traditional retail providers of financial products.

He said: "Another view holds that, in future, investment managers will become providers of 'solutions' - products that seek to meet specific liabilities or savings needs - as well as components."

However, an unnamed respondent interviewed as part of the survey warned that offering such solutions would be a "dangerous business".

The respondent said the industry should not promise an outcome that might not be delivered.

"We're not a litigious society here in the UK, but you could find more legal challenges going forward as a result of perceived misallocation of assets," the respondent said.

"I don't know what the answer is, but we resist the idea of being in the solutions business.

"The word implies you have solved somebody's problem."

Meanwhile, the survey also found that liability-driven investments (LDI) grew by a third to 18% of overall corporate pension fund assets last year.

Corporate pension funds accounted for 37% of all institutional investments surveyed by the IMA, totalling £2.6trn (€2.9trn).

Saunders said the institutional market had already seen an expansion of LDIs for defined benefit clients.

"Similarly, in the defined contribution pension market," he added, "investment managers offer more integrated products such as target-date funds or strategies for the drawdown phase."

While pension funds overall saw their share in equity rise slightly compared with 2008, the increase was only by 2 percentage points, with 1.7 percentage points of that in UK equity.

At the beginning of the decade, UK pension funds held more than 70% of assets in equities and another 19.1% in fixed income.

However, the combined holdings of both areas in 2009 only amounted to 85%, a third of which is now invested in fixed income.

Despite the overall changes in equity investment, those local authority pension funds surveyed by the IMA still invested 73% of assets in equities in 2009, with another 20% in fixed income, in stark contrast to corporate pension funds, which invested around 41% in each.

Corporate pension funds also were the strongest supporters of passive investment, with more than a third of assets managed this way, while local authority pension schemes managed around 20% of assets passively.

The IMA also found that while ETFs had doubled in popularity globally since 2006, in the UK, they only accounted for £26bn of all investments in 2009. 

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