GLOBAL- Watson Wyatt is following the lead of rival consultant Mercer Human Resource Consulting with publication next January of data on performance of the managers it recommends.
In an interview with the Financial Times, head of global investment Roger Urwin, who is now on sabbatical, confirmed that they will publish data on theoretical portfolios, divided along various asset classes and run by those managers recommended by Watson Wyatt.
In Urwin’s absence, head of European investment consulting Nick Watts explains: “we’ve been tracking ratings of managers for some time but we thought a better way forward would be to construct notional portfolios driven by the specialist manager researchers since we split manager research by asset class.”
Watson Wyatt has been running these notional portfolios for a shade over two and a half years and will publish the results when there is a three year track record next January.
The consultant is using Deloitte & Touche to verify the data. Says Watts: “it only makes sense to look at performance data that is independently verified. As consultants, when we look at managers’ data we expect it to be independently verified and so I think it’s reasonable for the market to expect the same which is why we’re using D&T.”
Once published, the data will demonstrate how, hypothetically, certain asset classes would have performed had an institutional placed assets with managers recommended by Watson Wyatt.
The move follows a phase during which investment consultants have been under pressure to demonstrate their recommendations are sound. In his report last year, Paul Myners expressed surprise to see that consultants had not shown their management selection business added value.
In February, the consultant Mercer Human Resource Consulting announced it was publishing previously confidential track records of the investment managers it had recommended to pension funds and institutional investors.
Mercers analyses its investment across 45 sub categories of which the data showed 39 of the groups of shortlisted fund managers outperforming the benchmark by an average 2.3% per year between 1996-2001.
In the same interview Roger Urwin, one of the original champions of a core-satellite approach to investment, took a sideswipe at some of the larger investment managers. He said: “quite a lot of the new and better ideas in investment are actually being developed by the smaller, flexible firms- those we used to refer to as boutiques.”
He added that the larger managers now have more to prove. “The very big firms that are successful are rare. They have developed a size of operation that inevitably leads to a certain amount of dysfunction.
“The aspiration to be a global investment firm is pursued by too many firms on the planet. It’s a tall order and not every investment firm needs to be global.”