Fund managers are siphoning up to 75% off the value accrued on each pension scheme under their administration, according to new research.
The startling findings, which are published in Monday’s Financial Times, show that some pension schemes are delivering just 16p for every £100 invested, with the asset management sector the clear beneficiary in many cases.
The analysis, undertaken by CEM Benchmarking for FTfm, shows much of the value created is retained by asset managers themselves, at the expense of clients and their pension funds. CEM’s principal, John Simmonds, told the FT, “A lot of value that is being created has been returned to the asset management industry rather than to the pension funds and their members.”
The findings are based on responses from over 8,000 pension funds around the world. As part of its analysis, CEM looked at how the portfolios would have performed had they been managed in line with received best practice. Generally speaking, industry standards across asset management stipulate managers’ take should be around 25% to 35% of the value accrued.
In 2017 the Financial Conduct Authority (FCA) published a report that called for much stronger implementation of fair practice. The FCA sought at the time to enforce industry-wide guidance to fund managers regarding the value they deliver to individual investors.
The CEM report comes despite greater transparency for the financial industry, steered by new regulations including MiFID II, alongside an increasing trend towards so-called passive investing.