UK – Consulting firm Mercer Investment Consulting has issued a broadside against the government’s proposed revisions to the Myners Principles on institutional investment.

The firm takes issue with the proposal for asset allocation and fund manager selection advice to be tendered separately. The attack comes ahead of tomorrow’s close of a consultation period on the proposals.

“The government’s treatment of external experts suggests a desire to weaken the market by burdening it with artificial distinctions and raised costs,” said UK head Andrew Kirton.

“Seeking to impose a rigid separation between giving advice on asset allocation and manager selection, for example, could be positively damaging given the intimate, inter-linked relationship between these two activities.

“Many important asset strategy-related issues, such as determining the forms of investment risk to take on and the scope of investment mandates, are settled only with the knowledge of investment products and managers.

“The separation of these decision-making activities is artificial. Such inflexibility will stifle innovation.” He said the costs of compartmentalising advisers and increasing the number needed will be “very real”.

Kirton’s comments echo those of other industry players. In January Watson Wyatt warned of “unintended consequences” from separating asset allocation advice and manager selection.

Kirton added today that the government’s assertion that trustees lack skill was “a sweeping and unjustified position”. He added that the costs of the proposed revisions have been “grossly underestimated”.

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