EUROPE - Pension funds, asset managers and consultants need to completely change the way they are working together to ensure the future of pension provision but not through new outside regulation, Amin Rajan, CEO of Create-Research, told delegates at the IPE seminar in Barcelona yesterday.

"As far as pension funds are concerned it is not something specific they want changed but everything," said Rajan as he summarized the findings of a study produced by IPE and Create-Research. (Details on the study can be found in the November edition of the IPE magazine and the paper can be downloaded for free from www.create-research.co.uk)

While asset managers and consultants were commended by pension funds for doing good work in several areas such as ALM and advice on governance, further work is still needed, according to Rajan, in three critical areas: strategic asset allocation, investment advice and strategy implementation.

Over 60% of the 87 pension funds taking part in the sturdy gave negative ratings in those three areas to consultants, he revealed.

It was a similar story on managers as 55% of pension funds reported they did not get the promised return and only 5% of fund managers who participated said they had done a good job for their clients.

As for pension funds themselves, Rajan suggested there is a need to rethink governance structures.

In general, much more contact between "all three elements in the value chain" is essential, he concluded.

In an earlier session, Neil Dwane, CIO Europe of RCM, an Allianz Global Investors company, had noted it was a shame asset managers who are "those who know about likely returns" never were around when pension funds made the actual decisions on asset allocation.

"We need a sea change in existing practices in the pension landscape otherwise pension funds will continue to stumble from one crisis to another", said Rajan.

However, he warned outside regulation would not be the solution to the problem.
"What we saw in this decade was a death of common sense and in the wake of the current crisis we will see a lot of regulation. But the problem is regulation is bringing about unintended side-effects and we have to make sure regulation not as blunt an instrument as it used to be in the past."

Topics