Investment department will restructure to offer less emphasis on managed funds
Pension trustees will be able to delegate investment decision-making processes through a new service from Aon Consulting. The service, entitled the Manager of Managers, is aimed at increasing the transparency of the group's advice at the same time as allowing pension trustees to delegate responsibility for the selection and day-to-day monitoring of asset managers.
The changes, due to be made in autumn of this year, are part of a restructuring of the Aon Consulting investment team. These will involve offering trustee's funds in specific asset classes, rather than managed funds that cover a range of different investments.
Funds that will be offered will range from actively managed portfolios with a relatively high level of risk to index tracking options. The actively managed funds offered will cover UK, UK small cap, European (ex-UK), North America, Japan, Far East (ex Japan) and UK corporate bonds. It is anticipated that more active and passive funds will be added.
The service, which is optional for all clients, will provide a series of structured funds that are exposed to a range of investment themes controlled by Aon.
Clients will be able to choose from one of three options. If they are happy with the current arrangements they will be able to leave them unchanged. If they want to fully adopt the new service they will be able to fully outsource their investment decision-making process to Aon.
Clients will also be able to partially outsource using the Manager of Managers service for specific asset classes so that they can, for example, delegate responsibility for management of US equities while retaining control of management in UK equities.
A number of factors led to the service being introduced. The Myners' report on the investment consulting business has led to increased calls for consultants to be more accountable for their decisions, according to Alvar Chambers, senior investment consultant at Aon Consulting. He said: 'We believe that offering Manager of Managers allows clear responsibility and allows clients to measure performance more easily.'
The new setup also allows clients to delegate responsibility for the day-to-day monitoring of asset managers to Aon Asset Management, enabling the group to change managers at short notice.
Trustees will be able to work with the consultants to determine a suitable long-term asset allocation strategy, taking account of schemes' liabilities while Aon makes the detailed decisions.
Specialist asset managers for each asset class will run the schemes' assets in multi-manager funds. The service will include regular investment consulting, together with quarterly reporting on these funds.
The company aims to put together a combination of funds for different clients based on qualitative and quantitative manager research. Chambers said: 'The objective is to pick combinations of managers we believe have the potential to add value but who have different approaches that will perform well at different times.'
Chambers reported that the process would involve using qualitative modelling tools to monitor each of the ongoing funds to ensure they do not build up excessive exposure to any risk structure.
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