UK trustees are 'confused' about fiduciary concept - Mn
UK - UK pension trustees misunderstand the fiduciary management concept if they award mandates for part of the portfolio, according to Remco van Eeuwijk of Mn Services.
The managing director of Mn Services UK said while interest in fiduciary management has begun to "snowball" among UK pension funds in the last year, evidence so far suggests that pension funds see partial mandates as another route to specialists manager selection and implementation.
But in some cases they are choosing to ignore the risk and strategic management services at the centre of fiduciary management, according to Mn Services.
"Some schemes seem to be confusing fiduciary management with delegation of part of the assets, such as multi-management in alternative investments," said van Eeuwijk.
"What fiduciary management really means is that we engage at the strategic level in terms of the scheme's funding target and risk budget and then take responsibility for implementing that strategy and its results. Delegated manager selection, multi-management and alternatives are often part of that implementation. But it is up to the scheme to specify what is delegated to whom and to what degree. Those are operational details. Our focus is on taking responsibility for advising on and executing the overall strategy."
He continued: "If you engage us not to manage the balance sheet, but only to generate alpha within a part of the portfolio, then you haven't really solved the governance problem and we wouldn't be your fiduciary manager. Really, all you have done is appoint a manager for an absolute return mandate," he added.
Fiduciary management is not seen as having a definitive business model, but a central element supplied in all cases is input into the strategic thinking of a pension fund, said van Eeuwijk.
More specifically, van Eeuwijk said this form of management should sit within the advice/investment services for pension funds where many asset managers choose only to deliver their specific mandate requirements and investment consultants provide the high level thinking but leave trustees to make any actual changes - leaving an apparent analysis gap between the two elements of support.
"Within our model, we don't need to be the lead strategy adviser. But whatever strategy the trustees decide on, we would take responsibility for implementing the portfolio in order to deliver the strategic objective." added van Eeuwijk.
The Co-operative Group's PACE pension plan awarded a specialist partial fiduciary mandate to Mercer's implemented consulting team last week. (See earlier IPE story: Mercer to set PACE on Co-op's alternatives)
Advisers to pension funds on fiduciary appointments recently suggested that UK pension funds would more likely to enter the fiduciary advice market at this stage by selecting a suitable manager on a partial basis, who would to look after a specialist mandate. (See earlier IPE story: Advisers to support trustees in search for fiduciary manager)