| Myners is still in the air, but pension funds are slow to react |
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| 10/10/2004 | |
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Pension funds are not at the leading edge on the Myners recommendations front. While transaction costs are becoming more transparent for pension managers, the impulse for change is rather coming from the asset managers' own initiatives than from the requirements of their clients, according to new research by Instinet, an execution-only broker. According to a report published by the firm, the transparency of trading has slightly improved since its previous survey in 2003. The proportion of pension funds that require their investment managers to split transaction costs from the associated management fee remained stable at 54%, but there has been a 10-point increase in the number of funds who believe soft commission should be self regulated with full disclosure. All in all, half of the respondents are in favour of this proposal. The Financial Services Authority (FSA) has made several proposals on unbundling execution costs from other costs such as research, but has refrained from outright regulation so far. Interestingly enough, asset managers themselves are quicker to divulge information about softing than their clients require it. "We have noticed an increase in the number of investment managers and brokers that have started providing this information without being demanded by the funds", said Nathan Tiefenbrun, the president of Instinet Europe Limited. For the time being, the number of funds that have stopped permitting soft commissions since the Myners report has remained roughly the same at 13%, with a little more than half the respondents not permitting the use of soft commission, including the ones that forbade the practice before. Nathan Tiefenbrun commented: "An interesting trend emerges in the general decline in the number of funds allowing the practice, it is worth mentioning that most of them only permitted this in a minority of cases." Trustees and advising Instinet has also noticed an increase in the importance given to consultant in the pension investment process, but managers still lack the tool for correctly measuring the performance of their advisors over the period, partly because of a lack of a common industry consensus and approach. "Following the trend of the 2003 survey, pension funds' continue to increase their reliance on consultants. There has been an increase in the amount of external advice received by funds and a decrease in the number of trustees that have started to react differently than before Myners to the advice", Nathan Tiefenbrun said. This trend might be partly due to the higher number of pension funds that provide their trustees with specialised training. Instinet reported that while the number of pension funds that dispense trustee training is on the rise, the average number of training days offered across the industry versus the 2003 findings has barely changed at 3.3 days a year. "The purpose of the training reflects a shift in the pension fund managers perception of what their trustees most important responsibilities are", commented Nathan Tiefenbrun. Instinet also said that two new frequently cited responses, that is, ensuring appropriate scheme funding level and trustees' compliance with Myners, indicated a noticeable change in perceived trustee responsibilities since last year Julien Laplante |
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Articles of the same Topic : Pension funds world
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