The solutions business
‘We’re in the solutions business!’ These were the words I was greeted with at the Worldwide Institutional Investing Conference inLondon recently. A fiduciary manager was presenting his vision for pension funds, and all kinds of jargon were thrown out – integral fiduciary management, partial mandate outsourcing, delegated CIOs and segregated diversified growth fund mandates.
Half of the audience seemed baffled, and not much the wiser after a panel of fiduciary managers and consultants had discussed all the jargon. One British pension fund trustee asked: ‘If this solutions business is so good, why didn’t you think of it 12 years ago, before we got into so much mess?’ The fiduciary manager was very slick: ‘Of course, we would have done this years ago but there wasn’t any demand.’
Another audience member wanted to know why he should pay a delegated consultant more to do the job they should have always been doing. And if they didn’t think they should have always been doing it, why not? ‘If you want us to act as a delegated consultant you are asking us to do more and that simply costs more,’ one of the consultants said, dodging the second part of the question.
Over lunch I chat to Bram, my friend from BIG Asset Management. Bram asks: ‘Do you think it’s easier for a consultant or an asset manager to become a fiduciary manager?’
‘Both have problems,’ I reply. ‘The consultants are used to hourly billing and are getting to grips with the real world of trading and execution. The asset managers have to get over their product-pushing mentality. But everyone seems to be in the solutions business now.’
‘That’s true,’ he replies. ‘But why isn’t BIG in the fiduciary management business?’ I ask.
‘Well, we do delegated CIO work in the US,’ he replies, ‘but we think the market is too crowded in Europe. Of course, we are waiting in the wings if we think serious money will come our way. But we do multi-asset solutions, as you know, Peter. Just bring us your problem!’
Marieke joins us for coffee. She used to be CIO at one of the industry pension funds but became an independent trustee and adviser when her fund merged with a larger one.
‘I find it a stale debate,’ she says, cutting to the heart of the argument, as always. ‘Some own, some invest and others advise. Some can do a combination of those, and we shouldn’t be so wedded to the traditional labels.’
‘I think I’ve got the answer,’ I tell them. ‘We’ll turn Wasserdicht Pension Funds into a solutions provider. Then we can earn asset management fees, improve our funding level, pay inflation benefits to our members and generally set the world to rights’.
‘Any jobs going?’ Bram and Marieke ask in unison.
Pieter Mullen is investment director at Wasserdicht Pension Funds