There is still some scepticism within the pensions industry about whether fiduciary fund management actually works. Yet, for a few years now, we have published results showing that it’s perfectly possible to manage funds in this way and achieve a steady increase in the funding ratio with no nasty shocks.
We believe as a business that this type of transparency should be standard and could benefit the whole pension fund industry. After all, if a trustee is to consider allowing fiduciary managers to take day-to-day decisions on their behalf, then they need to know the approach can work and deliver what they need. After all, when appointing an equity manager or bond manager, understanding how the performance has been achieved is a key part of the selection process.
For this reason, we continue to encourage others in the industry to publish their results. Unfortunately there is still considerable resistance to doing so. We have suggested that a third party could publish an aggregate of everyone’s results. While we believe this may soon happen, it would require the consent of all firms and many still don’t want to take part.
So what’s holding them back? Some firms say that every portfolio is different, with its own characteristics and guidelines, so comparison is unfair. But there’s no reason they couldn’t all be compiled together to remove the concern of peer group comparisons.
Of course, people will say that the pensions industry is naturally conservative. And it is. But it’s also an industry where trust is very important, so the more transparency we can encourage the better. Trustees have many options and will need convincing that isolated successes weren’t just down to luck. However, once they see that better results can be achieved through a fiduciary management approach, we think they’ll seriously consider it.
The industry wants a proof statement that fiduciary management works, so being more transparent isn’t just about coming clean. There’s a strong argument that it could benefit the whole industry and improve the overall results achieved by pension funds.