confuse inertia with long-termism, and fail to
recognise that timing can be critical, even for
“Exposure to a diversifi ed portfolio of hedge
ultra long-term strategic decisions.
Shortage of time and sometimes lack of
funds gives investors exposure to a different
investment expertise within many trustee
bodies often contribute to the diffi culty of package of risks than is available through
making major shifts in strategy, let alone those
which are at odds with the consensus. Many
long-only equities or bonds”
consultants have therefore tried to persuade
clients to delegate more authority to them,
sometimes in parts of the investment process share of the market as funds try to address the disadvantages of a decision-
such as tactical asset allocation or manager making process which is often driven more by the investment committee
selection, but sometimes through full-blown timetable than market opportunities.
fi duciary management, where the entire
implementation of strategy is formally CONFLICTS OF INTEREST
delegated to the consultant. For the consultant, Rather than changing the advisory model itself, some consultants,
in addition to being better paid, such particularly the larger ones, have eff ectively turned themselves into
approaches have the advantage of clearer investment managers, creating multi-manager or specialist products while
accountability and help to address the problem simultaneously trying to retain a role as strategic adviser. Somewhat
that assessing the quality of advice can be quite surprisingly, this type of outsourcing has proved rather more acceptable,
subjective. Perhaps, schemes need to remember particularly to smaller funds, perhaps because buying a fund or product
James Goldsmith’s adage that ‘when a man seems a less radical decision than changing the decision-making structure to
marries his mistress he creates a job vacancy’; encompass fi duciary management.
every time an adviser turns product provider, Traditionally, investment consultants have cast themselves in the role of
this creates a vacancy for an adviser; whether the guardian of the funds they advise, even though they have traditionally
this role is fulfi lled by internal staff , the been paid far less than the guards they oversee (otherwise known as asset
investment committee or an external consultant managers). Financial and other factors are incentivising consultants to
is a matter of individual choice. become ever more similar to investment managers, all the while continuing
Th us far, ‘implemented’ or ‘fi duciary’ to claim the ‘guardian’ role. Schemes need to decide whether they want their
management has yet to capture the imagination advisers to continue in the role of ‘fund guardian’, for all its imperfections, or
of the UK industry and remains a minority whether they are happy for the consultant to give up the advisory role and
choice, so it is diffi cult to assess how successful become an asset manager, fi duciary or otherwise. But what they must never
these approaches have been. However, it seems forget is that combining the role of guard and guardian is fraught with
likely that they will capture a somewhat bigger confl ict and may even compromise the security of the entity.
PROFILE – FACT BOX
Nicola Ralston, FSIP
Career highlights:
Nicola Ralston, FSIP, has over 30 years
investment experience as an analyst, portfolio
manager and investment consultant. She is now
director and co-founder of PiRho Investment
Consulting, which specialises in absolute
return and hedge fund investing. Nicola spent
over 20 years at Schroders, where her roles
included managing the UK institutional business
and head of investment for the Group. She was
subsequently head of global investment
consulting at Hewitt Associates. She is a former
Chair of CFA UK and has been a governor of CFA
Institute in 2003. She is also a director of the
Edinburgh Investment Trust.
34 WINTER 2008/09
32-3432-34 consulting .indd 34consulting .indd 34 27/11/0827/11/08 15:54:3215:54:32
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