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We help our clients develop a well thought out investment strategy built around their objectives.
We know that every scheme is different. That’s why we design tailored solutions for you. We have smart, relevant ideas, but we know that’s not enough – if you don’t feel able to actually implement them, they are useless. That’s why the way we work with you is really important. We do three things:
We talk your language so you understand the options – a pre-requisite for you feeling able to make a decision.
We know we don’t know today what will turn out in future to have been the best option. So we focus on areas of agreement between all stakeholders, so decisions can be made.
We’ll give you our view, because we’re in it together.
Our objective is to empower you to move beyond talking and take action. We think we’re pretty good at it, and the feedback from our clients suggests they do too.
So what do we actually do? We combine technology and effective communication to help our clients:
Put in place the right strategy for meeting their long term objectives;
Plan for how they will react to changing future circumstances; and
Monitor their progress against those objectives.
There are a number of services we provide to our clients to help them set an appropriate strategy for meeting their objectives and ensure it remains appropriate.
This is sometimes called “the Journey Plan”. This incorporates the target funding level (e.g. self-sufficiency or buy-out) and timescale. Key factors influencing the outcome are sponsor cash contributions and investment returns. As such, the input of the sponsor into these discussions is valuable. It is necessary for trustees to assess what can be supported by the sponsor’s covenant strength.
We will help you understand the issues and assess what is a realistic objective for your scheme. We will use our bespoke integrated risk management and reporting tool, Radar. One of the outcomes from the Journey Plan review is a return target. You will also have a clear understanding of the balance between investment returns and cash contributions in achieving the target.
Critical to this is understanding the risk associated with different structures. We will help you look at different growth portfolio structures. We will also help you assess how much interest rate and inflation risk to hedge. Throughout, we will provide training and education to ensure you feel able to make informed decisions.
We are very focused on using simple and relevant ideas that make a difference for our clients. We will use our Radar software to bring our analysis to life. That said, we constantly remind ourselves that whilst models are useful, they are just a tool and don’t override good common sense.
Thinking today about when you might be able to de-risk (or need to re-risk) in the future, and how you might do this is important. This increases the certainty of meeting your objectives. It also helps you react more quickly in future.
Often, settings triggers can be helpful, but using the right type of trigger is important. For example, funding level triggers to assess when you’re ahead of expectations might lead to a move from growth to matching assets. On the other hand, market level triggers would be more appropriate to decide when to de-risk by extending liability hedging.
It is important to consider how to implement a new strategy. This includes selecting specific investment managers and funds. It also includes how best to transition the assets from the current strategy to the new one.
We conduct detailed manager research. Our aim is to identify the characteristics we believe are required for them to meet their objectives over time. Through this, we will help you appoint successful managers. We will use our in-depth manager research to help you select managers you feel comfortable with. For a given asset class as appropriate, we will:
Use our research to recommend a shortlist of managers;
Provide a summary of our research on each;
Organise each manager to present their proposition to you; and
Help you select one.
Whilst this is the typical process, we are happy to be more directive in your selection of managers if you prefer.
The arrangements then need implementing. We will ensure costs and risk are controlled during any asset transfer. Moving assets can be a very risky and costly business. We will manage asset transitions on your behalf to ensure it is completed:
With all paperwork and instructions completed on your behalf as far as possible;
At minimal cost; and
With risks managed.
We have designed a robust and thorough process to achieve these objectives. Transaction costs are the costs of physically buying and selling assets, typically the bid-offer spread. We explore a number of options including the use of in-specie transfers, matched trades and timing trades to reduce these costs. We also ensure the transition is structured to minimise the time the assets are disinvested from the market. Being out of the market can be very detrimental if markets move against you. Hence this is a risk you should avoid.
It is important to monitor how your strategy is progressing against the objectives it was designed to achieve. Our monitoring service helps you stay focused on the important issues and drivers of performance.
Radar again helps here, through its functionality as a powerful monitoring tool. Assets and liabilities are updated daily with liabilities measured under a number of different sets of assumptions (e.g. Technical Provisions, Self-Sufficiency, Accounting). Radar is an online tool and is available to you. This enables changes in funding position to be measured. These changes can be attributed between the different sources of return (and risk). This is supplemented by our quarterly monitoring reports.
In recent years, the potential investment solutions available have increased in number and complexity. Mindful of the Pensions Regulator’s push on Integrated Risk Management, you need to carefully consider the best governance structure to meet your needs. One of the options that is growing in popularity is to outsource portfolio design and implementation – this is known as Fiduciary Management.
We are not a Fiduciary Manager and do not intend becoming one. However, our history of advising schemes means that we well understand the governance challenges you face. We have recruited individuals that have been Fiduciary Managers. This gives us a unique insight into this market. Combined with our independence, this enables us to provide the valuable guidance you need, as advised by the Pensions Regulator and FCA, in the areas of:
Deciding on the most appropriate governance structure;
Selecting a Fiduciary Manager; and
Monitoring the Fiduciary Manager’s performance.
For more information, please go to our Fiduciary Management Oversight dedicated page.