The Top 3 Criteria Used by Pension Schemes to Assess Asset Managers


This blog post will continue to examine aspects of process pension schemes use to evaluate their asset managers.

As discussed in previous entries, it’s very important for asset managers to understand what schemes want from them at this critical juncture. Doing so improves the odds of one’s mandate being continued.

Our previous two blog posts looked at certain behavioural do’s and don’ts which asset managers should keep in mind when being reviewed, but this current entry will look more at the information that scheme’s take into account when assessing their asset manager, and which of those criteria take precedence.

A recent Professional Pensions poll, which put this question to our audience of scheme professionals, returned the following results:

1. Your performance relative to the benchmark

The definition of “good performance” varies from scheme to scheme. Our survey finds that asset managers are judged more on what they deliver relative to their benchmark than, say, relative to competitors in the market.

This underlines the need to communicate effectively with your pension scheme clients, so that you understand what their objectives are and can formulate investment strategies to produce the results they’re aiming for. Ultimately, these goals are the yardsticks by which you’ll be later judged and your mandate could stand and fall.

2. Chemistry and Trust

The human element of the client-manager relationship is highly valued by pension schemes. Finding a manager who shares the scheme’s investment philosophy and strategic vision helps to build trust.

So, be mindful of the effects that any changes in personnel may have on your relationship with your clients, be it the addition of star talent to your managerial line-up or the loss of key managers. Your pension scheme clients will want to know about them. And, if you’re intending to change your firm’s investment philosophy, bear in mind that this too could alter the relationship.

3. Fees

One might have expected fees – the perennial first place finisher in such polls – to come top of the pile again. It is interesting that it is relegated to third place by our respondents, indicating that cost is not the be all and end all for schemes.

For performance to have trumped fees, in terms of importance, indicates that ‘bang for one’s buck’ is more important to pension schemes than ‘buck’ on its own. So, make sure that you’re adding value in the service you provide, and delivering on the specific goals set by the scheme. Fees are still important, but our results indicate that the more bespoke your service is, the less of a factor costs will be in the review.