Brunel outlines owner/manager dynamic

Softer issues around the expectations an asset owner has of its service providers are difficult to measure and monitor. Expectations such as acting with integrity, good levels of communication, and the evolution of organisational structure are all important aspects of an asset owner/manager relationship, yet are not typical in investment management agreements.

Now, in a bid to promote long-term relationships with its managers, Brunel Pension Partnership, the £30 billion ($38 billion) collective of 10 like-minded UK local government pension schemes, has developed the Brunel Asset Management Accord for its managers.

The accord is a document, jointly signed by an appointed manager and Brunel CIO Mark Mansley, that outlines expectations around the partnership.

The accord states that it is intended to help clarify understanding and shape expectations in the implementation of the investment mandate that Brunel has awarded to the manager.

It’s a document expected to assist in the promotion of integrity and better alignment between the manager and Brunel, especially with regard to goals and time horizons.

“The aim of the accord is to capture not only our expectations of managers, but also the spirit of what they can expect from us,” Mansley says. “The idea is that by putting this document together, we can address managers’ key concerns and help managers understand what matters to us.

“It’s a proactive approach intended to equip managers to work with us more collaboratively and focus our dialogue with managers on the really important issues.”

In the accord, Brunel outlines its expectations under five main criteria: being long term; communication is vital; responsible investment and stewardship; collaboration; and thought leadership and innovation.

Being long term gets the most attention in the accord but expectations in that area are not limited to the asset manager’s actions. While the pension organisation states that it expects performance over the medium to long term and that the relationship will last several years, possibly a decade, it also addresses Brunel’s own actions in the monitoring of managers. The accord states that “investment performance, particularly in the short term, will be of limited significance in evaluating the manager”.

While Brunel typically expects its mandates to prove themselves in three years, and does terminate them with good reason, it expects some mandates to be in place for 10 years or more. It wants managers to be aware that appointing new managers is resource intensive and not something Brunel would do lightly.

The accord was developed in consultation with Brunel’s chief responsible investment officer, Faith Ward, who says it is intended as an opportunity for clarity and openness on both sides, with the aim of making manager relationships a true partnership.

“We hope that by spelling out our expectations, [we will make] asset managers feel safer and do better,” Ward says. “We believe that this documented approach is groundbreaking in the investment industry and hope that others will follow our lead. In the long term, more co-operative and transparent relationships will have better results for us all.”