New research from Aon Hewitt shows that almost 80% of UK pension fund trustees spend less than 20 hours per quarter on investment-related matters. The results of the Aon Hewitt Delegated Consulting Survey 2010 also show that one in four trustees is only able to dedicate five hours or fewer per quarter to investment matters.
Zuhair Mohammed, chief executive of Delegated Consulting Services at Aon Hewitt in the UK, said:
“The challenges faced by DB schemes are neither simple nor one-dimensional and have undoubtedly placed increasing pressure on pension scheme trustees. Many schemes are still in negative funding territory and the financial crisis has also weakened the covenant of many sponsors. Putting the assets to work to recoup losses and to improve the funding position has become the priority.
“Highlighting the results of our research is not intended as a criticism – but a reality check is needed if assets are to be put to work more effectively. Continued economic uncertainty and highly volatile financial markets are stretching the already limited resources of most trustee boards to the extreme.”
Zuhair Mohammed continued: “Managing market volatility will undoubtedly be a key theme for the foreseeable future – and that requires investment skill and conviction. What is clear from our survey is that the time devoted to investment matters and the level of investment expertise permanently on trustee boards is simply falling short of what is required.”
Other findings in the research included that almost three-quarters of respondents said that the percentage of investment experts sitting on trustee boards is 25% or less – even though they were expecting to carry out major investment reviews in 2011.
The survey also revealed that nearly 50% of participants feel that trustees typically make decisions too slowly. Nearly three-quarters of the survey sample stated that trustee knowledge and the speed of decision making capability were the two factors driving demand for delegated investment solutions.
Zuhair Mohammed added: Trustees have the toughest of tasks and they recognise the shortcomings of the traditional model in which most are still working. Of course, pension schemes have a long term investment horizon, but that should not be the cause of short term disengagement on investment matters. Timely decisions with regards to manager selection, asset allocation and risk management will be crucial to investment performance in the coming years.
“We are convinced that pension funds that are prepared to be nimble and to act swiftly will emerge in a better position than those adhering to more static strategies. For most trustees this means looking beyond their own boardroom for expert help.”
The survey of 307 pension trustees, pension managers and others was conducted in May 2010.
Source : Aon Press Release
