Tesco Pension Fund chose to follow its internal investment team's advice over that of its consultant when choosing an alternative fund, reflecting how large schemes are moving investment governance in-house.
The supermarket's pension scheme previously went with the selections of its investment consultants, its chief investment officer Steven Daniels said at Pensions Week's Leadership summit.
However, he said the scheme now had more of a partnership relationship with their consultants and will source some of their own investment opportunities.
“The interesting thing for us has been, in at least one instance, we’ve actually sourced our own alternative fund that the consultants didn’t particularly like and wouldn’t have recommended,” Daniels said.
"We had a very good discussion about why they didn’t... we took the consultants through their objections. At the end of the day the trustees said ‘If you think this is the right thing to do, we’ll go with you.'"
He added: “It was a case of explaining [to the trustees] why we thought some of the consultants’ objections weren’t particularly relevant."
The company’s consultants advised against investing in the fund because they said it was at a lower stage of development and didn’t have a sufficient track record. However, the scheme felt they had the ability to take on the risk, Daniels said.
At the end of the day the trustees said ‘If you think this is the right thing to do, we’ll go with you'
British Coal Staff Superannuation Scheme has also built an in-house team as a preferred option to traditional investment consulting and fiduciary management.
“We felt very strongly that we needed the assets to perform in a particular way, we wanted them to meet our objectives and increasingly we became certain that we were getting past views and a model that wasn’t focusing on our particular needs,” said Philip Read, the scheme's trustee chair.
“I was also concerned about the lack of time that we as trustees were spending on strategic stuff, because we used to spend an awful lot of time meeting managers and making decisions about [them], which frankly doesn’t add value,” he added.
The scheme now has an investment committee, an in-house investment strategy team and an implementation team, responsible for making and implementing investment decisions.
These strategies are typically the preserve of larger funds. “I would say [in schemes of] over £3bn we’re starting to see [in-house] teams being built”, said Patrick McCoy, head of investment advisory at KPMG.
