UK roundup: Merseyside, Derbyshire, Towers Watson, Pensions Trust, Islington
UK - Merseyside Pension Fund is to start publishing an annual review of its responsible investment (RI) actions in the autumn, while Derbyshire County Council is searching for a custodian for its local government pension scheme (LGPS).
Elsewhere, Towers Watson has claimed defined contribution (DC) pensions need "re-engineering", the Pensions Trust is to review its investment strategy following a new appointment, and the London Borough of Islington has awarded a UK corporate bonds mandate.
The pension fund stated it had taken account of the recommendations of the Walker Review and the Institutional Shareholders' Committee (ISC) Code on the Responsibilities of Institutional Investors that forms the basis of a Stewardship Code.
It stated: "The fund considers that its responsible ownership policy already complies with, and may even exceed, the principles in the ISC Code. However, the fund believes it has direct relevance for managing its relationships with external investment managers, and will require its managers to state their approach to the ISC Code on a ‘comply or explain' basis."
The MPF claimed it was not "necessary, nor practicable, to make responsible ownership an explicit part of its investment manager mandates". Instead it argued it will urge managers to adopt the ISC Code, and promote the UNPRI as best practice, and its selection criteria for investment managers will reflect this preference.
As part of its ownership policy, the fund confirmed it would start to publish an annual responsible investment review, including disclosure of its voting record and a review of the approach of external investment managers toward RI and ownership practice.
A spokeswoman for the pension fund said: "The RI Review will be the first time that MPF provides a comprehensive report on its RI activity as a stand-alone from the fund's annual report and quarterly reporting to members. It is explicitly linked to the UNPRI mandatory annual reporting and assessment process. The PRI Assessment is due to be reported back to signatories in August and we plan to send our RI Review for pension committee approval in September."
The scheme, which had assets of £1.76bn in March 2009, is searching for a custodian for its UK, European and North American Equity Portfolios to take effect from 1 October 2010. The closing date for submissions is 22 June 2010.
In a report, Journey well, arrive better, Towers Watson has argued DC schemes need to be significantly re-engineered to address the weaknesses of the system and restore trust. It said while DC members are realising the need to address investment risk, plan fiduciaries also have to review investment strategies and default arrangements to "redress the balance of risk and return".
Gary Smith, senior investment consultant at Towers Watson, said: "Against this backdrop, and with much greater awareness of and engagement with the issues, we are confident that a more robust DC proposition is emerging."
Figures from the consultancy suggest DC provision is becoming more dominant, with DC assets accounting for 42% of global pension assets against 32% in 1999.
Smith added: "A really positive development of late is a strong move towards better understanding of the uniqueness of plan memberships, particularly with respect to investment risk. An analysis of a specific plan's membership, its demographics, its likely outcome requirements and its general tolerance to risk is vital when designing investment strategies, including the default, as well as when agreeing the member engagement approach."
While there are a number of "key facets" to DC schemes, Smith warned: "Governance is the essential ingredient that pulls everything together to make a DC proposition substantially more than the sum of its parts."
Adkins joined from Towers Watson, where he was a senior investment consultant for 12 years, and he will be responsible for the Trust's investment service and the existing investment team to help develop new investment policies for the scheme.
Stephen Nichols, chief executive of The Pensions Trust, said: "David will primarily be responsible for overseeing our current investment strategies, and will also be in charge of reviewing these to ensure that as an organisation we are able to offer funding and investment solutions of the highest calibre to our members."
The portfolio will be managed as part of the Standard Life Investment's £4bn UK Corporate Bond pooled pension fund. Mike Curtis, Islington Council's corporate director of finance, said the move was "an integral part" of their investment strategy.