I’m pleased to see People’s having the courage to do sack State Street from managing £28bn of people’s money.

I am not able to comment on the aptitude of Invesco and Amundi but State Street is a bank that works with other financial behemoths and it does not have a good reputation. This is a story that is running on the FT on the day that People’s sensational defenestration of State Street was announced.

The Financial Times brokes this on the day that Starmer was meeting Trump in  America. I wonder if it was on Trump’s agenda or Sir Nigel’s meeting.

Can we bring some probity to the Wild West across the pond?

Let’s roll back to the FT’s announcement.

The People’s Pension decided to hand a £20bn developed market equity mandate to Amundi and £8bn of fixed-income assets to Invesco. The scheme, one of the UK’s largest multiemployer defined contribution schemes, said the two companies would run the funds “with a focus on responsible investment”. It retained just £5bn with State Street, which had previously managed all of its assets.

Let’s be clear, the sub-text is obvious. State Street, one of America’s leading financial institutions is not considered to have a “focus on responsible investment” and you do not have to read very far in the institutional financial press to recognise that there is a schism between the way we (by which the UK and Europe)  invest and the way that American houses are carrying on.

I was at a DG Conference yesterday morning listening to a number of senior figures talking about investing in UK assets from start ups to infrastructure. I am not allowed to mention names except for mine and mine was a question to an eight strong panel and an audience of important investors which included People’s Pension. Mine was the only audience question in 180 minutes and it was this (I wrote it down)

“Today we understand that the People’s Pension has taken £28bn out of £33bn from the American investment house State Street and handed it primarily to Amund , a French Bank and Invesco – which has a strong presence in the UK. Do we see this as significant for a conference discussing investment into and in the UK?”

Taking the piss?

Shortly after asking the question I headed for the gents and found myself chatting with someone who like me was relieving himself. I asked him, not knowing who he was and who he worked for, whether he thought my question pertinent (it had had no engaged answer), my fellow reliever smiled and explained he was part of the People’s Investment Team and that he and Dan were very proud to have done what they have.

I cannot mention names but you can guess by the gender segregation that persists in such circumstances that it was a “he”. It turned out the fellow had a good knowledge of pensions having worked with a major insurer providing what I can with-profits pensions. Though I don’t partake in alcoholic consumption, I intend to go to the Governor’s House and buy him what he wants to drink

Not at People’s (anymore)

How State Street stole clients money – https://henrytapper.com/2014/02/02/what-do-you-do-when-the-lights-go-out/

What People’s are doing is not taking the piss. When People’s Pension sacked LGIM and appointed State Street I was furious on this blog. State Street was in 2014 fined £22m by the FCA for stealing money from clients.

I asked managers who were using State Street including Scottish Widows and Nest to think again about what we now call “responsible investment”. 

A year later in October 2015 I berated People’s for sacking good English managers (LGIM) and appointing State Street. 

My article announcing the appointment of State Street to run all the People Pension’s money

This is from the article advising People’s that their relationship with State Street was founded on immediate mercenary rather than fundamental investment principles.

In early 2014, State Street were found guilty of over-charging a variety of pension funds and were fined by the FCA. Funds which were stolen from included the staff scheme for Sainsburys and the Royal Mail pension scheme. You can read about it in my blogs at the time – what do you do when the lights go out and too big to worry about- what should we do about State Street.

State Street now have three big UK DC pension clients- it provides underlying investment administration to NEST, it manages the bulk of funds at Scottish Widows and it is lead fund manager at People’s.

In February 2014 I wrote to Toby Strauss, Scottish Widows’ CEO (he resigned yesterday) and asked if Scottish Widows would make a statement on State Street and would , on behalf of its customers, take action to censure the global American investment bank. I have never received an answer (and since he is leaving I expect I never will).

A year later  (2016), a bunch of State Street managers responsible for felonies were put in jail in the states.

I suggested to Nest, Scottish Widows and most of all People’s Pension, that they consider their relationship with State Street.

For the record , here are the tombstones that today litter Linked in.

The Pension PlayPen should not have appointed State Street,

They have , ten years having bought, reversed the purchase of management services.  State Street has a long history of bad behaviour which I have called out on this blog for over a decade. Can we please make the behaviour of our managers part of the fiduciary decision making we adopt.