The figures, released for the first time, show that the company’s UK fiduciary management clients’ funding positions improved by over 15%, on a gilts basis, since March 2009. During the same period the estimated average UK pension scheme’s funding improved by around 4% on the same basis.
Ed Francis, EMEA head of Investment at Willis Towers Watson, said: “This track record is an indication of what is possible when professional portfolio management, a strong focus on specific client needs and excellent governance are combined. It is what these clients signed up for and we are delighted to have delivered these results for them, during a challenging time for pension funds.”
Willis Towers Watson attributes its performance to superior risk management of growth assets, timely liability hedging and the identification of strong return-generating ideas across multiple asset classes. It notes that the average UK DB scheme funding-level progress was very volatile during this period, and produced a weak overall result despite generally good returns from growth assets and the widespread availability of liability-hedging strategies.
Ed Francis said: “Willis Towers Watson fully supports transparency, measurement and the reporting of meaningful performance figures for fiduciary managers. We believe that, as a minimum, measurement should be assessed relative to client-specific liabilities, should include an assessment of risk as well as return, and should be considered in the context of what was possible in the economic environment.”
Willis Towers Watson believes that the average UK DB scheme-funding shortfall also came about through a lack of investment resource applied to managing the overall portfolio which the fiduciary management approach addresses.
Pieter Steyn, UK head of delegated business at Willis Towers Watson, said: “We have seen that fiduciary management can give funds an edge in a variety of market conditions. This clearly benefits the trustee, sponsor and very importantly the members. It has required innovation and cost control which in turn has bolstered competition in the asset management industry.”
Willis Towers Watson believes that in the last decade, since it has been active in the fiduciary management market, the UK pensions industry has benefited from significant improvements in:
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Resourcing for risk management, asset allocation and manager selection
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Access to sophisticated investments and innovation among providers of these
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Accountability for investment decisions
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Alignment between pension funds and providers
Pieter Steyn said: “Fiduciary management still represents a small proportion of the UK DB pension fund market. Our fiduciary management service provides expert investment resource to schemes from tens of millions to multiple billions and has delivered enviable funding-level outcomes after costs. So it is not surprising that this market is growing.”
Willis Towers Watson now has delegated clients globally with a total of over US$75 billion of assets under management.
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