There are areas within your investment strategy that could perform better.
At first glance, this step may appear unnecessary. However, in our experience this is key to developing a suitable strategy. Getting this right can pre-empt significant difficulties later on. In practice, investment objectives vary radically from scheme to scheme.
We are very keen not to skip this step, so we do not charge you for the report or tool.
It is also the only area where we will not give you a firm recommendation. We will rarely be in a better position than you to judge what is important for your scheme. Instead we can support you in making your decision with:
Understanding the implications of risk is vital when setting asset allocation.
We have developed a proprietary Asset Liability Model (ALM) to manage risks arising due to mismatches between assets and liabilities. Our ALM extends beyond the approach used by more traditional UK investment consultants by applying the risk management techniques used by fund managers to pension fund liabilities.
Our ALM gives you the advantage of comparing various potential investment strategies with regard to different aspects of risk, so you can understand the full implications of your decisions, particularly the risk / reward trade-off.
Usually we can find strategies that reduce risk at the same time as increasing the expected long-term return on the assets. We will make an unambiguous recommendation based on our understanding of your objectives. However, the ALM is an interactive tool. We encourage you to investigate alternative approaches to put you in a position to make an informed decision. The two pictures below are sample screen shots of the model we used for one of our clients in 2017.
We try to avoid recommending fund manager selection exercises to our clients, as the costs can be hard to justify for small schemes. We prefer to implement the new asset allocation strategies with the existing managers if possible. However, there are circumstances where this is either not practical or not desirable. So we still take manager research seriously.
Past performance is very unreliable as a guide to future success of active fund managers as it is impossible to separate luck and skill when examining historic data. Frequently periods of good performance are followed by periods of poor performance (or vice versa).
Our answer is to focus on five specific factors which can increase the likelihood of selecting a fund manager that will outperform in the future. These five factors are:
Our fund manager research programme covers 138 investment managers. We use a third party provider, CamraData, to help us with initial screening. This enables us to refine our search to a smaller universe of managers, which we then visit for more detailed research.
Our focus is on qualitative research where we believe our experience and background provides valuable insight.
This includes (where applicable):
Our investment monitoring product is flexible so that you can choose the frequency that is most suitable for your scheme.
In our view, the most important and useful aspect of monitoring is an estimate of the impact of investment markets on your funding position since your last formal valuation. Our analysis also quantifies and explains the main factors that caused the change.
The report is set out as five questions we would ask if we were trustees:
o What has happened to your assets?
o What is the likely impact on your funding position?
o How have your fund managers performed?
o How were your assets invested at the end of the quarter?
o What do we want to draw your attention to?
In addition to all the features above, we produce one-page analyses of pooled funds, based on using the performance data to answer five fundamental questions that ought to be asked. This is supplemented by our qualitative assessment of the fund and manager to reach a conclusion. You can select for which of your pooled funds (if any) you would like this analysis.
We also offer a quarterly check of interest rate and inflation hedges.
A sample monitoring report is available on request.