NAPF launches independent pension trustee toolkit for assessing investment consultancies

As part of its core aim to raise standards within the UK pensions industry, the National Association of Pension Funds (NAPF) has today launched an independent toolkit to help trustees assess the performance of investment consultancies.

The toolkit consists of four Assessment Tools and has been launched in response to pension fund concerns1 about the difficulty of assessing and comparing investment consultants.

Chairman of the NAPF Assessing Consultants’ Performance Working Group, Mark Hyde-Harrison, said:

“Over the last year, we have been giving particular thought to the role of investment consultancies, their interaction with their pension fund clients and how to promote transparency and understanding in the market for investment advice. The resulting toolkit will help both pension fund trustees and consultancies improve their working relationships to the benefit of the industry especially pension scheme members.”

NAPF Chief Executive, Joanne Segars, said:

“The Toolkit is aimed at promoting best practice and raising standards within the UK pensions industry and to help pension funds assess and compare the performance of their consultants on a consistent basis.

“It will give trustees more confidence in their investment decisions. Ultimately this means pension scheme members can be reassured that trustees are doing all they can to make sure their retirement income and interests are being looked after.”

To help promote transparency and understanding in the market for investment advice, these practical user-friendly assessment tools which, although different in their specific individual application, are designed to compliment each other. The four tools to help pension managers and trustees evaluate and compare the type of services available from the different UK consultancies are listed below:-

(1) A Survey of Pension Funds - 458 interviews with pension funds were conducted in a survey designed to measure, in aggregate, how satisfied pension funds are with the service they currently receive from their investment consultancies. Overall, pension funds reported high levels of satisfaction. See Appendix 1 for Executive Summary of the survey.

(2) Balanced Scorecard - Pension funds can use the scorecard to record how they perceive their investment consultancy has performed across a range of client service areas.

(3) Pro-forma for Comparative Data Analysis - A template that pension funds can use to request comparable information from each investment consultancy participating in a tender process.

(4) Best Practice Principles – The Toolkit will be further developed through 18 principles envisaged as an industry standard that all investment consultancies could subscribe to in their professional relationship with clients and their agents. The NAPF is currently working with pension funds and investment consultants to develop the Best Practice Principles.

The toolkit has been produced by a working party made up of NAPF investment council members, investment consultants and the NAPF policy team. The Chairman of the Working Party was Mark Hyde-Harrison, Chief Executive Officer of the Barclays Pension Scheme.

Assessing Investment Consultancy Performance - (hard copy) costs just £18 for NAPF members and £35 for non-members and can be ordered online at http://www.napf.co.uk/publications/. There are discounts for orders of five or more copies.

Front Cover Image available for journalists.

ENDS

Notes for Editors

1. In November 2007 the NAPF published Institutional Investment in the ‘UK: six years on’ a progress review on the application of the Myners Principles. This review noted that over half of pension funds surveyed formally assessed their investment consultants as Myners had advocated in 2001.

However, 51% of trustee respondents to the survey cited the lack of a best practice methodology for assessing and comparing investment consultants as the main reason they did not undertake formal assessment. The remit of the NAPF working group was to help plug this gap by delivering measurement tools that would allow trustees to evaluate and compare consultants on a consistent basis.

2. The Assessing Investment Consultants’ Performance Project is under NAPF copyright.

About The National Association of Pension Funds

The NAPF is the leading voice of workplace pension provision in the UK. Some 10 million working people are currently in NAPF Member schemes, while around 5 million pensioners are receiving valuable retirement income from such schemes. NAPF Member schemes hold assets of around £800bn, and account for approximately one fifth of investment in the UK stock market.



Journalists requiring further information, please contact Mark Brooks via

020 7808 1312 mark.brooks@napf.co.uk 07917 506683



APPENDIX 1 - Executive Summary of Pension Funds Survey

The key findings from the survey were:

· A positive assessment: Overall, pension funds rate their investment consultants very positively. Depending on the questions asked, between 86% and 99% of respondents assessed their investment consultancies as being very good, good or acceptable. Again, across the range of questions, only between 1% and 14% of pension funds gave their consultancy a poor or very poor rating.

· High points: For DB schemes 91% of respondents rated understanding of the scheme and sponsor’s position and 81% of respondents rated the explanation of technical investment issues to trustees as being good or very good – higher than for any other services. For DC schemes the two services receiving the highest proportion of good or very good assessments were the understanding of the scheme, member needs and the sponsor’s objectives (80% of respondents) and the explanation of technical issues to trustees (73% of respondents).

· Areas for improvement? In contrast for DB schemes 59% of respondents rated delivery of proactive advice and 58% of respondents rated value for money as being very good or good. For DC schemes, only 51% of respondents rated their consultancy as very good or good at providing value for money and only 47% of respondents assessed their consultancies as very good or good at providing member communications material.

· DB asset allocation / DC default fund: 78% of DB pension funds said their consultancy’s advice on asset allocation and investment objectives had been helpful or very helpful. 70% of DC funds said their consultancy’s advice on a suitable default fund had been good or very good.

· Manager selection and de-selection: 76% of DB schemes and 69% of DC schemes said their consultancy’s advice on which investment managers to appoint was good or very good. 83% of respondents thought consultants made de-selection recommendations at the right time.

· Conflicts of interest – limited and well managed: Only 9% of DB respondents surveyed were aware of a conflict of interest that their consultant had faced in connection with the scheme. Where they arose, almost all respondents considered them to be well managed.

· Highly recommended: A significant majority of respondents, 84% for DB and 82% for DC schemes, would recommend their investment consultancy to a scheme with similar needs to their own.


Mark Brooks
Head of Press
Tel: 020 7808 1312 07917 506 683
Fax: 020 7222 7585
http://www.napf.co.uk


NAPF Investment Conference 2008

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