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Special Report

Impact investing


Multinationals centralise pensions activities

GLOBAL- Multinationals across the world are centralising the management of their pension fund arrangements according to a new survey by the consultant Watson Wyatt.

The survey, which covers 42 multinationals running a total of 1,877 pension funds worth a combined $480bn, shows that multinationals are increasingly likely to centralise decision making including manager selection.

"There is a wide spectrum of governance approaches for a multinational, but it is clear that there are financial efficiencies from a more globally co-ordinated approach" said Chris Ford, head of multinational investment consulting at Watson Wyatt.

Watson Wyatt’s survey unveils a very different approach to pensions management across the globe with north American-based multinationals taking the most centralised approach.

North American multinationals are well ahead of non-North Americans in conducting policy from their headquarters. Overall, 13% of multinationals describe their plans as centralised and 30% describe their plans as decentralised, leaving the majority saying their approach is somewhere between.

The survey found that multinationals from north America are five times more likely to use a common external adviser across their pension plans than non-North Americans. They also frequently have headquarters' personnel on local boards, something non-North American multinationals tend to avoid.

It also found that almost one in eight non-North American multinationals have no global integration compared with one in twenty north American multinationals

Non-north American multinationals are twice as likely to have no headquarters involvement in the selection of trustees or fiduciaries for local plans. They are also twice as likely to have no global asset allocation guidelines

Over half of the non-North American multinationals surveyed had no headquarters guidance on manager selection, compared with 30% for North American multinationals.

Ford says that often when companies try to achieve a globally-co-ordinated approach purely through central control, they run the risk pf alienating local fiduciaries and even falling foul of local legislation.

“A more inclusive approach where decisions are taken in parallel, co-ordinated by headquarters, is more likely to succeed as it allows local fiduciaries to retain an appropriate level of involvement,” says Ford.

Those companies surveyed suggested various obstructions to further centralisation including: corporate culture (cited as the main obstruction by 36% of respondents), local governance structures (22%) and trust between headquarters and local plans (20%).

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