Over 80 per cent of both defined benefit (DB) and defined contribution (DC) schemes would recommend their investment consultancy to a scheme with similar needs, according to the National Association of Pension Funds (NAPF).
The NAPF’s third Investment Consultant’s Performance Survey found that the percentage of schemes who would recommend their investment consultancy to a scheme with similar needs was lower among DC schemes (80 per cent) than DB schemes (86 per cent)
Pension fund schemes, especially large ones, are taking steps to ensure they hold their investment consultants to account. A quarter (28 per cent) of DB scheme respondents had in-house investment expertise and this grows to 48 per cent of funds over GBP1bn size, but shrinks to 11 per cent of funds of less than GBP250m. One fifth of those with in-house expertise had introduced this capability in the last four years, with 50 per cent pointing to lower costs and a significant 25 per cent reporting that in-house expertise helped to challenge consultancy advice.
Encouragingly, results from the survey remained broadly in line with the findings of previous surveys (2008 and 2009) despite the challenging regulatory and investment environment over the last five years.
Stewardship was a new topic to the survey this year. Only 30 per cent of respondents were ‘very satisfied’ with their consultants’ stewardship capabilities, with 48 per cent ‘fairly satisfied’ and three per cent were ‘fairly dissatisfied’. This response rate was consistent across all scheme sizes.
Joanne Segars, chief executive, NAPF, says: “It’s clear that overall pension schemes value highly the advice and expertise their investment consultants provide, although the difference in satisfaction levels between DB and DC schemes is something to watch as the number of DC schemes and assets in those schemes will grow quickly. The NAPF will develop a practical guide to help trustees properly evaluate their investment consultants’ service and encourage a structured approach to making sure this crucial link in the investment chain continues to operates in pension schemes’ best interest.
“The growth of in-house expertise over the last four years, especially for larger DB pension schemes, indicates that it is here to stay and we expect to see further growth, driven by schemes looking to lower costs and test consultancy advice. In the future we may see a more collaborative approach between in-house investment sub-committees and external investment consultants, especially among larger pension scheme funds.
“The level of satisfaction from schemes of their consultants’ stewardship capability is disappointing, especially as we know pension schemes have growing expectations in this area. This survey and last year’s NAPF engagement survey both highlight the need for a clearer and more robust procedure on stewardship to be put in place.”