Watson Wyatt cautions that separation of strategic asset allocation advice and investment manager selection could lead to ‘unintended consequences' including increases in costs and further ‘disjointed' decision-making.
Responding to government comments on the progress of the Myners principles, the pension-consulting firm says there is some ‘logical merit’ supporting the principle of selection of advisors along ‘best-in-class’ lines.
Nick Watts, head of European investment consulting at Watson Wyatt says adding openness to pension funds in the areas of absolute return investing, risk budgeting and liability-driven benchmarks in the past three years has seen a blurring between traditional strategic asset allocation and manager selection.
“The result is that our clients now seldom view asset allocation and manager selection independently, but rather as a joined-up, risk-based investment strategy that is dynamic. Therefore separating these decisions could undo much progress and put a cap on innovation,” he says.
Watts calls for a bigger effort to ensure suitable structures mainly through fund managers, to enable Trustees to evaluate and engage with investee firms on corporate governance issues.
Watson Wyatt adds that it agrees with the Governments comments on the progress of the Myners principles with conclusions in the report supporting the firms view, that when it comes to the larger pension schemes, that greater progress has taken place, while further improvements are also possible.IFAonline
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