Schroders chief slams pension consultants’ ‘conflicts of interest’
The crisis in the UK pensions market exposed the “conflict of interests” at investment consultants and they ought to be regulated, according to Schroders chief executive Peter Harrison.
“There are definitely some quite major conflicts in the industry, which still need addressing . . . in terms of being both the assessor of asset managers and the manager of assets themselves through their implementing orders,” Harrison, head of the FTSE 100 asset manager, told a conference on Wednesday.
Pension fund trustees use investment consultants, such as Willis Towers Watson, Mercer, Redington and Cardano, to advise them on investment strategy. Some of them also offer fiduciary management, which involves the delegation of some investment decisions by trustees to advisers, alongside providing investment advice.
He said that he was “concerned” about private debt markets, where a “covenant-lite approach” to financing was adopted, meaning fewer restrictions on the borrower and fewer protections for the lender. “A huge amount of assets flowed in a short period of time,” said Harrison. “It will be interesting to see what recovery rates look like and what leverage is hidden there.”
Harrison said: “There’s been a massive build-up of debt in the system, [and] how it’s owned is not entirely clear.”
This story originally appeared on: Financial Times - Author:Harriet Agnew
