UK - Trustees make “extremely high quality” asset allocation decisions, which can get spoiled during the implementation stage, says a senior investment consultant at Watson Wyatt.

Speaking at a conference Nick Horsfall said that although the Myners Report had had ‘a go’ at trustees, many of the efficient asset allocation decisions made by them depended on “maintenance of the quality of the decision”.

Horsfall told IPE: “There have been occasions where the implementation of some fairly good decisions by trustees have lost some of their good value through poor implementation”. He added that on average, trustees were more willing to get acquainted with investment procedures than in the past.

The consultant declined to explain whether his remarks were meant as a comment on the quality of asset management.

In ‘Alpha management and risk awareness: a pension scheme’s view’, Horsfall tackled issues such as risk and returns, passive strategies and enhancing return while managing risk.

He argued it should be about “what pension schemes should be interested in, not necessarily what managers and banks want to sell them”.

But pension schemes needed to move away from “the benchmark obsession” and do some refocusing.

“There has been an obsession with control of risk relative to the benchmark,” he said, pointing out as an example that the FTSE All Share had “no particular liability matching merits”.

“Refocusing of the reason for any mandate might provide greater clarity of what is really needed,” he told delegates.

When it comes to risk management pension schemes go for ‘sub-Libor’ strategies, such as gilts and returns are sought “in a single dimension” such as holding lots of equities or in ‘classic core mandates’, Horsfall explained.

Watson Watt, he said, was a “strong proponent” of swaps, such as inflation-linked swaps. Horsfall said they allowed “closer matching of liabilities and assets, reducing risks and increasing returns”.