PENSIONS: OVERVIEW
PENSIONS AND
ENDOWMENTS
© IMAGE SOURCE
Pension funds and endowments are facing some challenging times.
Still, they are many opportunities for candidates who are willing to roll up
their sleeves and to go work, writes Maha Khan Phillips
BY: MAHA KHAN PHILLIPS • PROFILES BY: STUART NEWMAN
It is a diffi cult time to be defi ned contribution schemes,” explains Drake. “Opinion seems to be split
T
a pension fund manager. Andrew Drake, executive director with between those who think that in fi ve
Th e credit crisis may have responsibility for the UK pension years all mid-sized pension schemes will
wiped as much as $1.5 advisory business at Morgan Stanley. be bought out, and those who think
trillion from the value of Defi ned benefi t, or fi nal salary pension funds can’t aff ord to be bought
institutional assets since the start of the pension arrangements, has become out,” he says. Personally, Drake is
year, according to consultants Watson increasingly costly for sponsoring sceptical. “Can a company every
Wyatt. Endowments have faced similar companies, largely because of the discharge its professional obligations
diffi culties, although for many the introduction of new accounting from the minds and hearts of its
impact has been less severe. standards which require assets and employees? What would happen if the
But pension fund managers are liabilities to be marked to market. Th e company failed?”
reasonably optimistic. “Th e whole move to defi ned contribution, where a Similar arguments have been raised
point about developing a long-term fi nal salary is not guaranteed when a in response to another rising trend
strategy is so that we can weather the member retires, has also fuelled the within the pensions industry – that of
storm at times like this, although none growth of a new area of pension fi duciary management, or the
of us realised it would get so bad,” says management: pension buyout outsourcing of the investment
one UK pension fund manager who is companies. In September, one such management component of the
a member of CFA UK. company, Paternoster, signed a £250 pension. Ultimately, responsibility for
Pension funds, either government million deal to buy assets from the the fund still lies at the hands of the
sponsored or corporate sponsored, retirement fund of the TI Group, a pension fund manager, and there are
manage the retirement assets of their technology fi rm. Th e pension scheme of governance issues.
members. Th e last few years has seen an TI Group decided to sell off its
unprecedented change in the industry. liabilities in order to diversify risk. DEFINED CONTRIBUTION
“Th e biggest trend on the benefi ts side “Th ere is a lot of heat being For many participants in the industry,
has been the closing down of defi ned generated at the moment by the the move to defi ned contribution has
benefi t schemes and setting up of Paternosters of this world,” explains brought its own set of challenges.
WWW.CFAUK.ORG CAREERS GUIDE 2009 79
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