Mercer has been dropped from an implemented consulting mandate it was awarded in 2010, as investors have begun to take a closer look at what they have signed up to.
Russell Investments announced today that it had been awarded a fiduciary mandate by the Loomis pension fund, worth £120 million. However, four years ago, the pension agreed an “implemented consulting” contract with Mercer.
As the approach to outsource investment decisions has taken hold, the number of firms offering oversight of these contracts has also increased. A study last month from Buck—a consulting firm that offers the surveillance service—showed more investors are making use of them, which may signal the start of a shift amongst providers .
“More people are asking us to review their incumbent manager,” Brian McCauley, head of fiduciary management evaluation at Buck, told Chief Investment Officer. “They want to be sure they are asking the right questions. So far there have not been many new tenders—but it will happen.”
McCauley said as many pension funds were obliged to undertake a three-year review, many were also revisiting their due diligence and making sure they were getting what they wanted.
Russell acknowledged that there would be more of these switches as investors looked into their existing relationships.
“[The mandate] represents the harbinger of a new and exciting phase in the growth of FM in the UK, as many that had adopted fiduciary management three or four years ago begin to assess the merits of their chosen provider,” said Shamindra Perera, head of the pension solutions group at Russell.
“Investors want help to understand what they are getting,” said McCauley. “If fiduciary managers are marking their own score card, it’s easier to put a sheen on things and unless they have internal resources and can challenge reporting, investors are turning to third parties to help them ask the right questions.
“This will naturally lead to more retenders.”
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