As an investment consultant, I am regularly in awe of the challenges that pension trustees face. Making decisions on behalf of thousands of members whose financial security in retirement rests in their hands. Now that’s responsibility!
I’ll take any opportunity to tip my hat to those who have taken up this great challenge. However, I wonder whether it needs to be quite so difficult?
In this four part blog series I’m going to look at how Implementation Managers can help trustees tackle difficult decisions and ultimately lead to improved member outcomes.
Why an Implementation Manager?
Over the last 4 years or so, I have worked with a wide range of pension schemes. Ranging from multi-billion pound schemes with thousands of members, to those with only a few hundred. All these schemes have either appointed, or are considering appointing, an Implementation Manager (IM).
And it seems to be working. Trustees I work with that have appointed an IM seem more confident and less susceptible to getting lost in detail. Their bandwidth is no longer swallowed by transitions, rebalancing and admin. Schemes with an IM are:
- better risk-managed
- run more efficiently
- set up to respond quickly to ensure the strategic asset allocation remains well-aligned with their objectives.
Isn’t this just Fiduciary Management?
No, this isn’t FM. Going down the IM route still leaves the Trustees fully in control. Unlike a fiduciary manager, an IM does not make strategic decisions on behalf of the scheme. They operate within a clearly defined set of parameters agreed in advance by the trustee board. The Trustees remain in control.
So how exactly can an Implementation Manager help?
An IM can help with a range of tasks which would traditionally be carried out by Trustees:
What kind of scheme would this be particularly suited to?
As mentioned above, an IM can serve schemes of varying shapes and sizes. But it is undoubtedly particularly well-suited for schemes with limited in-house investment support.
Would the Implementation Manager services be carried out by an asset manager?
Yes, normally it’s a scheme’s LDI manager that is best placed to take on the role of IM. Given many operational tasks are related to this mandate – such as collateral management, hedging interest rates and inflation etc.
When is the right time to appoint an Implementation Manager?
My advice to a pension scheme Trustee board would be to focus on appointing the right IM before you get your teeth into a wider strategy review. One of the main reasons for this is that the manager may be able to save you some serious Trustee governance bandwidth, admin hours and operational costs in helping to implement the new strategy.
Note, not all IM are able to help with all aspects of implementation. Some will handle operational set-up of new funds (including completion of subscription documents, tax forms, legal reviews etc.); others wont.
Over the course of the next three weeks I’ll be exploring some of the specific functions that IMs can help with.
In my next blog, I’ll look at how Trustees can use Implementation Managers to keep their scheme on the least-risk path to full funding, using a Dynamic Risk Management Framework.
