UK - The issues surrounding the costs the UK pension fund industry pays its fund managers and the problems of shareholder activism, as highlighted by the Myners' review, will not be resolved by next March, the end of the two-year period the government gave the industry to comply with the review, Paul Myners told the NAPF's investment conference in Edinburgh today. "These are areas where I fear we will fail," he warned.

Summarising the extent to which his review has influenced the pension fund industry in the last year and referring to the government's two year compliance time frame, he predicts that the fund management industry will continue to show too much resistance in both areas.

"Many trustees don't seem to realise that the costs the pension fund industry pays to the fund management community each year amounts to around £8bn. This is far too excessive and trustees need to question it more. Frankly, I am partcularly stunned to see that softing arrangements still take place.

“And still not enough trustees are questioning their investment managers about the shares they hold. This is disappointing. If a trustee sees that their portfolios contain underweight positions for certain stocks, they must start asking managers why they are holding a stock that is losing them money," he said.

Elsewhere, Myners said the government has reacted positively to all areas of his review and comes under unfair criticism in otehr areas. "The government is coming under continued pressure to re-introduce some from of tax credit for diviedends in equity investments. This is somewhat misguided. The policy to remove the credit was actually inherited from the previous government and the low interest rate environment and successful fiscal policy we now enjoy is helping to compensate," he said.

Myners welcomed the growing number of trustee investment decision courses that have sprung up in the last year and the increasing willingness on the part of trustees to seek further training in this crucial area of their duties. "This was a key part of my review and I'm glad to see a positive reaction."

He says the continued trend towards scheme specific benchmarking among pension funds and the demise of balanced funds is evidence that trustees are responding to his recommendation that they drop peer benchmarks and review their asset allocation policies.

However, he points out that trustees are still not drafting formal business plans. "This is an area that I think needs to gather momentum," he comments.

Elsewhere, he says that it is encouraging to see pension funds enquiring about the merits of private equity. Myners recommended in his review that pension funds should adopt more private equity and other alternatives in to their portfolios. He confirms that the consultancy industry are saying more and more funds are seeking advice in these areas.



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