Pension funds balk at No 10 appeal to fuel UK investment boom https://t.co/jTpJz8qNMU
— Josephine Cumbo (@JosephineCumbo) September 27, 2021
Reading Jo Cumbo’s excellent article on the reaction of fund and pension scheme managers to Johnson and Sunak’s call for an investment big bang is instructive.
At one end of the investment chain are the massive insurers charged with covering liabilities such as the payment of pensions bought out from corporate DB schemes.
At the other is the young and nimble Pension Bee whose job is to maximise the returns for those saving for a later day.
Unsurprisingly, reactions to the Government’s call range from Pension Bee’s precise
“We do not believe the UK government should play a role in guiding pension asset allocation”
to Mike Eakin (CIO of Phoenix) ‘s reluctant acceptance
“We don’t have a choice but to invest more in illiquid assets, albeit with the right risk profile. Yields on corporate bonds and government bonds have been suppressed to such a level that it is not possible for us to meet our obligations to either our policyholders or our pension customers by simply restraining the investable universe to gilts and corporate bonds.”
This is not the “dig for victory” response that Government wanted but I think it is the response they expected. It allows Government to ask awkward questions of a sector of the economy that has enjoyed more than its fair share of tax privileges (in the opinion of many civil servants I know).
The key statement in the article comes from Neil Slater, global head of real assets, with Abrdn.
‘The first question I ask is not “Will this build back better, or will this level up?”, the first question I ask is “Does this make sense for my clients?”’
Whereas I have sympathy with the comments from Pension Bee and Phoenix, I have no sympathy for this virtue signaling. If you don’t think that your clients see benefit in making a positive societal impact by investing in real assets, why did you take the job?
If you are so “global” that you want UK money to be focused on overseas opportunities then why is so much overseas money being invested into the UK from overseas?
I am not of the view that Britain is in crisis but I am of the view that the world is. Britain has so far seen relatively little impact from global warming but our pension funds are ahead of the game in considering its risks, both here and abroad. This is as a result of Government intervention and means that we lead the world in matters such as reporting and stewardship. No one is asking whether the greenium required is in the client’s interest, it is assumed that unless we take action now, all the talk at COP 26 will just be hot air.
Firms such as Abrdn need to be proactive and innovative, not reactive and regressive. It is not good enough to make cheap marketing statements to the FT, Abrdn should be telling us how it is intending to use real assets for the good of the people it is investing money on behalf of.
Britain doesn’t need blind patriotism, but constructive entrepreneurship from fund managers who are looking to the future with a determination that there is one. Pension Bee, far from ducking these challenges, forced LGIM to seed a fund for its clients that does not invest in fossil fuels. This not only met the wishes of its clients, it made a clear statement to energy stocks to clean their act up. Without the entrepreneurial zeal of a few young people, we would not have Pension Bee, Tumelo, Moneyhub -and AgeWage. These firms did not have clients to make sense to – but 10 years ago.
New asset managers are springing up to meet the challenge, like Connect – which has attracted former People Pension’s CIO- Nico Aspinall to join it. Edi Truell is looking to use the Pension Superfund as a force for good. Several master trusts, including Nest, Smart and Cushon are actively engaging with illiquids.
These firms are creating a new order in the way we manage our money that makes sense to the people who use them and to society at large.
The FT are right to tell us the temperature of the water and the temperature towards the Government’s initiative is at best, tepid. But its readers have the opportunity to challenge obstructive and regressive thinking and promote in its place, positive behaviors that lead to better outcomes for Britain and the planet.
Ultimately those who manage our money are accountable not just to big Government, but to Britain’s 19m workplace savers and a lot of pensioners besides. It is time we woke up to the reality that “our client is everyone”.
Since the publication of this blog, the Government has published a further announcement of their intent to press on.