Charles Stanley focuses on bespoke services in fiduciary market
Charles Stanley can trace its origins back to the 18th century, but its fiduciary manager award reflects very 21st century qualities. Its portfolio construction techniques enable the firm to manage defined benefit (DB) pension schemes’ total portfolio of assets in a flexible, bespoke manner.
“We start from the assumption that every pension scheme is
unique and design a service that suits each client,” explains Charles Stanley
CEO Paul Abberley. “Some of our clients are focused on hedging their
liabilities. Some of our clients have clear long-term goals. Some have a strong
appetite for investment risk. Some need regular access to up-to-minute
investment data. But some don’t want any of these things. There is no one size
that fits all, which is why our clients value our bespoke service.”
All elements of Charles Stanley’s fiduciary services are
bespoke and can include asset-liability modelling, value-at-risk calculations,
bond-based liability-driven investments and dynamically-managed growth
portfolios.
The bespoke element is critical. “We listen to our clients’
needs and spend time to understand their circumstances and ambitions before we
propose a specific course of action. This allows us to build bespoke strategies
and portfolios that suit each client. Our clients place significant value on
the on-going support they receive from our investment experts, because getting
the plan right is just as important as the execution,” says Abberley.
Charles Stanley invests clients in best-in-class passive
funds; it is an active asset allocator but passive stock picker. The attraction
of this approach is simple, says Abberley: “Index-tracking funds are so
numerous, effective and easy to access that for most clients they are the most
efficient way of building and managing a globally diversified portfolio. They
help to keep costs down and to focus the investment process on what matters
most – asset allocation.”
But, he acknowledges, they do not suit everyone. If this is
the case, Charles Stanley’s collective funds research team can provide research
into actively-managed funds.
Fiduciary management remains a small part of the overall DB
pension scheme market, which means the potential for growth is huge. “There
have never been so many options available to trustees of DB pension schemes –
particularly smaller schemes – and fiduciary management is leading the way in
terms of innovation,” says Abberley.
According to a KPMG survey from 2015, the size of the UK
fiduciary management market has grown more than the most optimistic manager
would have expected, now exceeding £100bn. It also noted an increase in the
number of larger schemes awarding mandates for a portion of their assets.
In Abberley’s view, the most effective fiduciary mandate
covers the entirety of a pension scheme’s assets. This allows the manager to
provide detailed asset-liability risk analysis and monitor risk on a daily
basis. However, this doesn’t mean that legacy or cherished holdings have to be
discarded.
“The bespoke nature of our portfolios can allow certain
historic assets and funds to remain unchanged provided they fit within the
overall strategy agreed with the client, no matter how large or small the
scheme,” he says.
Challenges remain for the sector as measuring performance
continues to be difficult for trustees, as Abberley acknowledges. “Performance
is by its nature difficult to compare due to different investment approaches
taken within the industry. We have adopted a robust performance measurement
process that allow our clients to review performance in a variety of ways.”
This allows clients to monitor the progress of the overall
strategy as well as the effectiveness of the Charles Stanley investment team.
“The biggest challenge for the industry is to help pension
scheme trustees to realise that by appointing a professional investment team to
manage their whole portfolio they gain control rather than lose it,” says
Abberley. “Trustees spend an awful lot of time struggling to juggle all the
different, complex elements of scheme’s portfolio when what really matters it
getting the strategy right – and making sure it is stuck to.”
Found this useful?
Take a complimentary trial of the FOW Marketing Intelligence Platform – the comprehensive source of news and analysis across the buy- and sell- side.
Gain access to:
- A single source of in-depth news, insight and analysis across Asset Management, Securities Finance, Custody, Fund Services and Derivatives
- Our interactive database, optimized to enable you to summarise data and build graphs outlining market activity
- Exclusive whitepapers, supplements and industry analysis curated and published by Futures & Options World
- Breaking news, daily and weekly alerts on the markets most relevant to you