LONDON May 20 UK pension schemes are losing out
on 1.7 billion pounds ($2.86 billion) of potential returns a
year because of active fund managers failing to differentiate
themselves from benchmarks, according to consultancy Aon Hewitt.
Around 75 percent of the 460 billion pounds of UK pension
fund assets invested in supposedly actively managed equity funds
is allocated to "core active funds", which "do little more than
track their benchmark", according to Aon Hewitt. This phenomenon
is commonly referred to as closet indexing, or closet tracking.
If these assets could either lower their fees or maximise
their returns through more active management, the consultancy
reckons they could deliver an extra 1.7 billion pounds a year
for pension schemes.
"Schemes committed to an active approach should steer clear
of managers that charge a high fee for essentially matching an
index," said John Belgrove, senior partner at Aon Hewitt.
"To deliver performance in excess of the benchmark, schemes
must be willing to take risk and follow a broad, unconstrained
strategy using the very best ideas and with the highest
($1 = 0.5943 British Pounds)
(Reporting By Jemima Kelly)