Reality Check: Trustees Unable to Devote Adequate Time to Investment Decisions, UK Survey Says

(November 8, 2010) — A new study by consultancy firm Aon Hewitt has discovered that UK-based pension boards, ironically, lack investment expertise.

Spokesman Colin Mayes told aiCIO that the findings of the research should not be perceived as a criticism, but should instead highlight the intense pressure that pension boards are facing and the need for assets to be put to work more effectively.

“Highlighting the results of our research is not intended as a criticism – but a reality check is needed if assets are to be put to work more effectively,” said Zuhair Mohammed, head of delegated consulting at Aon Hewitt, in the research. He explained that continued economic uncertainty and highly volatile financial markets are stretching the already limited resources of most trustee boards to the extreme.

“What is clear from our survey is that the time devoted to investment matters and the level of investment expertise permanently on trustee boards is simply falling short of what is required,” Mohammed stated.

In a study conducted in May of 307 of their UK pension trustee clients, the consultancy found that three quarters of the people in charge of pension funds say their boards lack investment expertise. Roughly 75% of respondents revealed that a maximum of one person in four on their fund board is an investment expert. Furthermore, 80% of respondents said they were able to spend only 20 hours considering investment matters in three months. According to the consultancy, the Delegated Consulting Survey 2010 reveals heightened demand for fiduciary management, which has caught steam in the UK.

Mohammed concluded that the mounting challenges faced by DB schemes have undoubtedly placed increasing pressure on pension scheme trustees. “Many schemes are still in negative funding territory and the financial crisis has also weakened the covenant of many sponsors. Putting the assets to work to recoup losses and to improve the funding position has become the priority,” he said.