How we helped the trustees carry out an independent selection exercise, to work within its guidelines
The background
The sponsor investment guidelines for its pension scheme allowed the trustees greater investment freedom if manager selection and implementation were delegated to a fiduciary manager. Therefore, following an introductory training session, the trustees asked LCP to run a competitive tender process to appoint a fiduciary manager to manage all of the Scheme’s assets.
- Medium-sized pension scheme with ~£250m in assets
- Low hedging levels, due to previous guidelines, had seen the deficit widen in recent years
Our solution
After considering the entire universe of fiduciary managers, LCP invited a long-list of five suitable managers to submit a proposal setting out how they would manage the Scheme’s assets. LCP assessed the managers’ responses against both qualitative and quantitative criteria:
- an analysis of the proposed portfolio
- risk management processes
- the managers’ ability to adapt to the Trustees’ specific requirements and beliefs
- team experience and expertise
- a comparison of performance and fees
From this, we identified a shortlist of three fiduciary managers who we invited to present to the Trustees and LCP on the selection day.
The results
LCP’s independence allowed us to run a comprehensive selection process, where proposals put forward were assessed by researchers with expert knowledge of the UK fiduciary management market. The Trustees are comfortable that they have selected the most suitable manager in the market, with the best possible fee terms, and that they have a clear audit trail detailing the rationale for this decision. The Trustees have valued our technical input into the appointment process, in what can otherwise be a lengthy negotiation of contracts.
LCP will continue to monitor the appointed fiduciary manager on a biannual basis to ensure that both fees and performance remain competitive relative to peers, risk procedures remain robust, and the mandate is managed in line with the Scheme’s objectives. We will also continue to provide the Trustees with strategic advice for example, setting investment objectives and monitoring the attractiveness of de-risking opportunities such as buy-ins and buy-out.
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