In a pioneering move for our sector last November, Brunel Pension Partnership published its asset management accord, a document designed to facilitate long-term relationships between the investment pool and its appointed managers.
A key strength in pooling is based on those relationships, and the accord gets to their heart. It is vital to our success that we put this relationship on an even footing, with communication being key to a strong, long-term relationship.
The genesis for the accord dates back several years ago when myself and Faith Ward were still at the Environment Agency Pension Fund. Repeatedly we found ourselves returning to the debate about the aims of long-termism versus the shortterm pressures of asset management.
It was clear that short-term thinking from asset managers within a long-term investment environment was a mismatch. We began thinking about what we could do to embed the spirit of long-term investing throughout our relationship with external managers.
We identified that a lot of the pressures faced within our relationships with asset managers are created by the asymmetry of those relationships. Often managers receive strong responses to comments or questions. We might be trying to get a sense of their processes and insights, but all too often those questions would be seen as criticism.
The accord is not a legal document, but it clearly expresses our expectations.
The positive side of long-term investment is that we can have timeframes that allow us to be patient. If a fund underperforms for a period, we’d rather work with a manager to examine why this has happened and assess whether something must be done, or whether to wait it out. The alternative is to watch a manager panic buy or sell a stock, hurting the long-term outcome.
At Brunel we live and breathe our values as responsible investors and seek to appoint asset managers with philosophies that match up to our own. If the managers we appoint do not actively embody their stated values and rationale, we will ask them to explain why this is.
We have discovered through experience that by working with managers we develop our own and their understanding, while forming constructive, collaborative relationships. If there is a problem, we seek to understand why and do our best to find ways to achieve better outcomes.
This far more proactive, positive approach is a winning scenario – for the asset managers, ourselves and our clients.
Key accord points
Being long term:
The manager is expected to be familiar with Brunel’s 12 investment principles, which include a strong emphasis on long-term value creation and stewardship, and other related strategic statements which Brunel may issue from time to time.
Communication is vital:
Both parties acknowledge the importance of open and free communication between themselves. Although communication may be frequent, both parties do not wish this to lead to short-term pressure and Brunel will endeavour to ensure that such dialogue does not inadvertently give such an impression. If the manager feels under short-term pressure, they should provide feedback to Brunel on these concerns.
Thought leadership and innovation
Brunel is prepared to be innovative and demonstrate thought leadership in collective investment, within the requirement of prudence and joint fiduciary duty.
Brunel welcomes open dialogue to explore ways to meet both its own and our clients’ evolving investment needs. The manager will keep Brunel informed of the evolution of its business and its investment process so that Brunel can ensure the mandate remains fit for purpose.
Mark Mansley, chief investment officer, Brunel Pension Partnership