The Canadian Source Of Employee Pension Fund Investment And Benefits Plan Management

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Pension Funds Want Closer Dialogue

By: Harry S. Marmer

The challenge for Canadian money managers in Benefits and Pensions Monitorʼs Annual Report – Money Managers is creating closer dialogue with their pension fund clients to develop innovative products which meet the needs of their clients. If they fail to do so, pension funds may be unwilling to buy new products from their asset managers. Thatʼs the conclusion of a global research study from CREATE, a UK-based think tank, co-sponsored by Citigroup and T. Rowe Price.

Liability driven investments, portable alpha, and hedge funds were cited by more than 60 per cent of asset managers as the products best suited to meet the needs of pension funds over the next five years. Yet these three were not among the top five products mentioned by pension funds. For them, global equities ranked first with 55 per cent of the respondents. Liability driven investments were cited by only 27 per cent of respondents.

pension funds closer dialogue

The study suggests that asset managers should increase their client focus and involve clients more in the product development stage. While many asset managers have produced new investment strategies, they are not necessarily what pension plans have wanted or have believed they will need.

Bruce Winch, vice-president and national lead, institutional investments, for Aim Trimark Investments and Invesco Institutional, is not surprised by this disconnect. He says at a recent industry forum, a chat with a client turned into a tirade as he was advised that this client didnʼt want to hear from any money manager unless they can “offer something that Iʼm looking for – which I doubt you can.”

What Winch heard this client saying was “letʼs go back to basics 101 on understanding the needs of the clients.” He says there is too much “product flogging going on” and not enough time is being spent on the basics, “getting to know what the needs of the client are, either directly or through the consultants, to either create products or respond to their specific needs.”

From his perspective, launching a product is a huge commitment “in a time and management point of view. We want to make sure we construct a product that has an actual market out there.”

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