According to a new research by Evercore Pan-Asset, investment managers of UK pensions funds are “wasting” more than 6 billion pounds a year by investing in actively managed equity, bond and property funds rather than cheap and better performing passive funds. The greater difference between the average gulf passive and active and the fees alone is partly due to higher fees for active funds but also poor stock selection. More than half of the money managed by the UK’s defined benefit pension fund industry was invested in actively managed funds, of which 65 per cent was invested in single-asset strategies. By switching this money to passive vehicles, the industry could save 6.2 billion pounds a year.
As stated in EuroFinUse’s “Private Pensions: The Real Returns”, which can be downloaded here, all pension products should be subject to prudential regulation taking into account the very long duration of the liabilities and therefore allow for higher portfolio allocation on investments such as equities. The focus should be on future cash flows, not current values
Read the Financial Times article here.