This is the second of ten articles written by Chris Sier which were originally published in Pension Expert. The original can be found here and is republished with the kind permission of the editor
In the first piece of this series, I stated that asset managers were not the problem when it comes to cost collection. That said, not all managers are equally committed to, or enthusiastic about, transparency.
It turns out that providing cost and performance data can sometimes be difficult for managers, both practically and emotionally. You learn more about an asset manager when they are asked to do something difficult or new, than when they are asked to do something easy.
We think this manager performance should be assessed according to three indicators: willingness – the willingness of the manager to give data; ability – the technical ability to generate and give the data; and responsiveness – an assessment of the attitude of the manager and those we deal with at the manager.
For each interaction, ratings are awarded based on a scoring from one to four for each of these dimensions, and these scores are reported to clients along with a commentary describing why the managers were rated as they were.
Few managers refuse requests
To date we have requested data from well more than 400 managers in and outside the UK, and very few have declined to supply data at all. Only two managers have been reported to the Financial Conduct Authority by their clients, although there are a couple more that are close.
However, beyond this small number of ‘detractors’, we have seen a range of increasingly warm responses from managers, and below is a list of the highest-rated managers with which we have dealt so far. This list represents those that have regularly scored three or four on each of the three characteristics of willingness, ability and responsiveness.
This list has obviously grown and changed over time, not just because we have gradually increased the scope of our mutual clients’ requests, but also because those managers that were initially reluctant have come around.
In basic terms, if you work with these managers they should give you no trouble at all in supplying data.
Within this highest-rated list there is a best-of-the-best group, and recently we were asked by Pensions Expert to name these to be put forward for the Pensions Expert ClearGlass Transparency Award.
These nominees are marked with an asterisk, and one of them will win the Pensions Expert ClearGlass award, to be announced in September.
There are many more managers who are now fully compliant with data provision requirements. At some point we will list them, so pension funds can have a head start in understanding which managers will be compliant.
For a trustee, this will be one less thing to worry about, which is important given that academic research shows that some trustees are reluctant to ask for data on their costs because they are afraid of its complexity.
Private sector leads the way
The list of managers we recognise as willing to give data is different and significantly larger than the list of managers that have signed up to the LGPS Code of Transparency. This is a clear indication of the willingness of most managers to submit data without the need for the compulsion imposed by the LGPS code.
What is also important to understand is that just because a manager is willing to give data to LGPS clients, and has publicly signed up to the LGPS Code to indicate as much, does not mean they will give data to you if you are not in the LGPS. We saw this a number of times initially, with managers offering LGPS clients a better service than non-LGPS clients, but this is increasingly rare as transparency has become ubiquitous.
This confirms for me that private sector pensions and their consultants, rather than the public sector, are leading the way on cost transparency. And that is very good news for everyone.
Dr Chris Sier is chair of ClearGlass Analytics and led the Financial Conduct Authority’s Institutional Disclosure Working Group