Nestlé Appoints Schroders to Co-Run in-House Fund

(February 6, 2012) — Food giant Nestlé has appointed Schroders to co-run an investment vehicle with its in-house asset manager, a year after bringing much of its fund activities in-house.

Robusta Asset Management has appointed the largest listed investment manager in the United Kingdom to co-manage its emerging markets fund, according to an announcement on the Irish Stock Exchange.

Robusta Asset Management is an Ireland-incorporated fund management company wholly-owned by Nestlé and is employed to invest the parent’s pension scheme money and other cash pools.

The announcement to the exchange at the end of last week said Schroders had been appointed to co-run an emerging market equity fund, and had taken control of assets at the end of January.

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Schroders declined to comment on the appointment.

Nestlé Capital Management, the York-based in-house manager of company assets, took over control of the Robusta funds in 2007 and by December 2010 had £7.1 billion under its auspices, according to the most recently available annual report. The company manages money for the company outside of its pension scheme, the assets of which are held on a pooled basis and amounted to CHF19.8 billion, or £13.6 billion, at the end of December 2010. At that time, the company’s aggregate pension deficit sat at CHF1.5 billion.

The launch of NCM sat alongside Nestlé’s decision to bring much of its asset management in-house. In 2008, JP Morgan Asset Management and Mellon Global Investors were axed from the external roster.

In 2010, NCM moved on with a plan to internalise the hedge fund of fund functions for up to 50% of the Nestlé Pension Fund assets, according to the manager’s annual report of the same year.

During the same time, a multi-strategy fund of hedge funds and a second private equity fund of funds were launched by Robusta Asset Management, according to its annual report.

At the end of December 2010, Robusta Asset Management was responsible for CHF9.3 billion. Schroders managed £182 billion at the end of September 2011.

Nestlé had not returned requests for comment at the time of going to press.

The most difficult part is the design of an effective pay-for-performance scheme in the investment function, writes Keith Ambachtsheer from the University of Toronto.

(February 3, 2012) — Remuneration for pension fund managers has come under the spotlight as investors have taken aim over investment banking pay, according to a paper published by Keith Ambachtsheer at the University of Toronto’s Joseph L. Rotman School of Management.

While much attention in compensation strategy is focused on how pension funds should exercise their say on pay responsibilities as investors in the corporate sector, little has been written on how pension funds should pay their own people, according to the newly released whitepaper.

The most difficult part of the corporate say-on-pay debate and the internal compensation question for pension funds is the design of an effective pay-for-performance scheme in the investment function, the paper by Ambachtsheer concludes.

The paper outlines six key questions around which a pay-for performance program could be built when the real markets path is chosen:

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1) What does it mean to invest productively?

2) What does it mean to administrate effectively?

3) What does it mean to advise wisely?

4) How well does our governance process work?

5) Are we using our scale to maximum advantage?

6) Are we attracting and retaining the right people?

With the average tenure for public pension chief investment officers being between three and five years, the compensation constraints in the public arena are not going away anytime soon, CIOs say. Last month, a study by Charles Skorina, an executive search consultant, revealed a performance-for-pay ranking — aiming to determine performance for pay by looking at the investment returns of CIOs over the most recent five years, computing how many basis points they earned per $100,000 of compensation, and then ranking them all by that measure of performance-for-pay. In Skorina’s latest newsletter, the study showed that Jane Mendillo of Harvard’s endowment, along with her popular CIO counterpart David Swensen of Yale University, ranked highest on Skorina’s list when looking purely at pay. Yet when ranking by performance-for-pay, the two CIO honchos stood at the bottom of the list — with Swensen in 46th place and Mendillo in 48th place, out of a total of 50 spots.

While Skorina noted that at least some CIOs deserve their pay because they produce consistently better returns than their peers, he continued: “Talent, in the final analysis, is a commodity in the market like any other. Employers have limited resources; they want the best talent they can find, but at a price they’re willing to pay.”

Read the paper “How Should Pension Funds Pay Their Own People?” here.