Pensions Investment and Outsourced oversight

A new perspective is needed

Trustees overseeing relationships with a large number of asset managers is a cumbersome approach and costly, particularly as schemes approach their end game. For pension schemes with higher return requirements, turbulent markets mean agility is key. This has been a struggle under the traditional model. Innovation is paving the way for schemes of all sizes to access services previously thought out of reach.

Schemes need simple, robust advice aligned to their objectives. Trustees need a skill set which is broader than traditional investment consulting. The traditional model is already being replaced with a consolidated solution, which sits somewhere on the spectrum from either:

• A streamlined provider approach through to Outsourced Chief Investment Officer model (OCIO) all the way to;
  
• A full Fiduciary Management model (FM).

The OCIO model separates strategic investment advice from implementation. The FM model combines the two. Both can also take important factors like ESG into account.

Strategy and Risk

• Having the right strategy is what drives success, it cannot be set and forget; it is important to spend time to tailor and evolve strategy to align to a schemes journey and stakeholder values.
• The risks faced by a scheme are multi-faceted, investment risks need to be considered holistically and not in isolation to ensure only rewarded risks are taken.
   

Implementation and Governance

• Demonstrating ongoing value for money to scheme members is paramount but this can be eroded by unnecessary complexity; impartial advice and ongoing oversight are required to avoid this.
• A strong working relationship between the Sponsor and the Trustee is critical to ultimately securing member benefits; a robust decision making structure is required for success.