I know Dan does podcasts of his own when he explains what is going on in his head but I don’t really get them. I want to know him selling the job he’s doing in one of the most important jobs in investment in the UK. People’s may not be the biggest today, but he points out that it’s growing pretty fast.
I wanted to know what he’s done and is doing to make this scheme have what he calls “an edge”. We have it here and I hope this blog is a decent interpretation of what Dan is saying, if it is – then I’ve learned something important about his job and what he’s making of it.
Leading investment figure of People’s Partnership (Pension) , Dan Mikulskis talks with IPE about the £36bn People’s has got under its control. With £800bn due to be within mastertrusts by the end of the century (according to the Treasury) , his thoughts are important.
What’s going on at People’s Pension? Are they worried about what’s going on in America and what are the chances of its recession? This is what isn’t going on at People’s, what is going on are to do with structural changes in markets, not short term blips.
The big questions are how much you want in the US and how much do you want your dollar investments hedged for pound spenders. That’s what Dan thinks – understand that!
People’s investment team only formally reviews the structure four times a year when investment advice goes to the Trustees at People’s Pension. He looks after advice and the implementation of Trustee decisions. I hadn’t thought of a CIO this way.
He wants advice being based on clear beliefs held by hm and his team. An investment team talking to an investment committee of trustees, makes for a clear means of getting things down , reducing costs, looking at new ideas.
What is People’s edge? “The sheer weight of new money coming through the door from member’s contributions” (and People’s not paying many pensions yet).
Mikulskis thinks a lot about what this means for him in getting a good deal for members – partnerships with managers – some of whom are the largest in the world. Amundi and Invesco are the examples. They are on the equity and fixed interest partners (respectively).
But partnerships like these have not been inherently scale able. That’s because there aren’t the necessary size of pension schemes with the asset owners scaling up. But that’s different in the UK now. He cites USS and now some of the pools of LGPS (but not as growing). But now he sees the larger master trusts in this scaled-up asset owners with money flooding in. He sees the UK asset owners such as People’s challenging the biggest in the world – the Californian, Australian and Canadian asset owners.
This means an expansion of team, constantly deploying into different kinds of funds, not necessarily into open ended funds. This is how the private asset growth happen with private “fund of one” rather than fund of funds is important. An internal team working with external management is the format for the current time. 25-30 internal experts working in one room twice a week means better communication .
The current asset ownership structure is good for the moment. This is following the changes from pooled funds with State Street to the new model with Amundi and Invesco with their segregated mandates. This is against the trend of the last 20 years where pooled funds means giving away the agency of the management of the funds. The IMAs with Amundi and Invesco are both over 100 pages of legalese. This is not even getting into the operational advantages of dealing where the assets are segregated and under the control of the likes of Dan and his team.
“The reporting of what is held” is a small benefit of investing “segregated“. The contract makes things out so contractual requirements take over from “best efforts” from the fund manager (efforts that often let trustees down). Voting is an example, something you need a house policy for in equities in particular. Firm wide alignment is now a minimum requirement for People’s- I guess that means a People’s way of voting – done.
Having worked as a consultant to CIOs, Dan feels he had the chance to put in place in his head before joining Pension Partnership.
Having worked in the UK for some time , his message to those working abroad is “hey – look at Great Britain“. The big takeaway is that things are working in the UK and he wants other schemes and managers to look at the “profit for member” arrangements at work at People’s (like id does in some Australian Supers). He sees this as critical to the spirit of auto-enrolment. He also sees UK moving towards a few default funds, so that employers do not need to make choices of how defaults are constructed.
Clearly he has Nest as an example with many of the smaller schemes he competes against as examples of multiple choices for defaults. He looks at the importance of keeping things simple, and a way to get value for member’s money.
Schemes are now maturing with generations retiring on DC pots sets a new challenge (a do it for me approach). How people are delivered a retirement income is clearly at the front of his mind. He talks the language of flex and fix and CDC without committing People’s to either of these.
