Evercore Pan Asset

Many funds in the UK employ an Investment Consultant to advise the trustees on asset allocation. The Sponsoring Company too may appoint a Consultant, as they retain a vital interest in how well the fund does. The Trustees listen to the Consultant’s advice at periodic intervals and fix investment guidelines, appointing managers to implement the agreed strategy.

This system can break down at times of stress, or in periods of great volatility. If Trustees met early in September in 2008, and then met again at the end of January 2009, they would have lost a fortune by staying fully invested in equities. The extent of the banking catastrophe might not have been clear to them early in September, but would have triggered defensive action by a sensible investment manager with discretion during the difficult last quarter of 2008. A fiduciary manager might have seen the problem in advance.

The bitter experiences of 2008 and the first quarter of 2009 have left many Pension trustees worried by the extent of the losses. They naturally ask is there some better way of organising things. Some are now looking at Fiduciary Management. That means appointing an investment manager charged with the duty of keeping the asset allocation under continuous review.

The Investment Consultant to the fund can assist in finding a suitable Fiduciary Manager. The aim is to keep costs under control by finding a manager who will not only implement the agreed strategy, but will keep the strategy under review. If the Fiduciary Manager thinks the asset allocation needs adjusting between meetings, he will either be given delegated powers to do so, or will contact a representative of the Trustees and say they need an urgent phone or email meeting to agree action for changed circumstances.

The poor returns on advanced country equities for a decade and increase in volatility means trustees and managers have to work harder to earn the returns pension funds need. The ever wider range of financial instruments and asset classes adds to the strain on trustees, who find it difficult to keep up with all the products and opportunities. There is a strong case for choosing a Fiduciary manager capable of undertaking dynamic asset allocation – seeking to earn a suitable real rate of return with controlled risk.

Just by chance, that’s what we offer at Evercore Pan-Asset! We were in cash last year, and are in riskier assets this year. We are enjoying the current ride in markets, but we know there are still major problems out there in the main economies, so we will not try to be too greedy.