Pensions Oldie runs a small(ish) DB scheme. He will not go on much anonymity if he names those act for him! But here is his response which is either an argument for consolidation of a cry of pain from someone committed to paying pensions to his members. This is his comment on my post of Haldane’s “Field of Dreams” speech
We were acting on investment advice which we tended not to challenge (except in respect of LDI which we only narrowly escaped by stalling trustee decision making).
Achieved investment returns (total scheme)
2025 2024
1 year to 31st March 3.1% 13.8%
5 years to 31st March 8.4% p.a. 6.3% p.a.
10 years to 31st March 6.8% p.a. 7.2% p.a.(2026 figures awaited)
Although advised these long term returns were about 3% p.a. more than an “Example DGF”. Also because of the open accrual cash flow positive nature of a relatively immature scheme, we have bought more assets when the market prices are depressed. (cue: First Actuarial chart). The result is the size of our surplus gives us sufficient freedom to exercise the Trustee’s fiduciary duty to our Members and also to the sponsor as we think appropriate without having a regulator directing us towards goals we think are inappropriate.
As noted above we have moved to a CDI approach and thanks to Derek Scott and Bobby Riddaway the Trustees now have the confidence to challenge investment advisors. We now seek to minimise the significance of market value movements and decision timing and to concentrate on opportunities and not on risks.
However we find asset managers do not tend to match our goals and tend to only offer products that seek to meet their goals and not ours. For example maximising management charges by linking them to value of assets under management even for distribution funds and by discouraging the direct holding of assets such as gilts and investment trusts. by smaller pension funds.
When Size does matter.
If you are running an asset manager, you have two ways of making money. Either you manage large amounts of money at small margin or you run small amounts of money at high margin.
Here value for money can be managed (as Chris Sier did and ClearGlass and Iain Clacher do), But the measurement of VFM for the smaller scheme such as Oldie’s is an expensive business and to do much with the information is tough – you don’t have much leverage.
The Field of Dreams is very big
There is much pointing at small schemes (whether DB – like Oldies’s) or SEI’s (see SEI’s recent VFM podcast. It is possible to achieve a lot by being nimble and trading the fund to maximise short-term returns. SEI’s Steve Charlton told Nico and Darren’s audience that he hadn’t used his own LTAF as the time wasn’t right. I’m not sure if the time will ever be right when you are looking to keep top of the pops in the CA tables.
The big schemes against which smaller schemes measure themselves are not bothered. They are in the Field of Dreams. Look at Nest and LGPS as the DC and DB examples. They are in the Field of Dreams and dreaming of delivering 50 or 100 years ahead. They have no fences excluding them, they will not be shut down for underperformance (USS is regularly under-performing).
But when you are small, relative to your peers and in absolute terms, you have to accept that you will be ignored and ultimately forced to consolidate or sell up. For mastertrusts there is a market, for DB schemes there are insurers and superfunds keen to absorb your assets and liabilities.
It is a horrible truth, but small schemes are not allowed in the Field of Dreams unless taken there by their consolidators.
