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UK pension fund management after Myners: The hunt for correlation begins

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  • David Blake

    (The Pensions Institute, Birkbeck College)

Abstract

The Myners Report will have a number of significant consequences for pension fund management and performance measurement in the UK. First, it changes the way in which assets are selected. The strategic asset allocation will have overriding importance in pension fund management. Asset classes will be selected on the basis of their match with liabilities in terms of correlation and volatility, rather than on the basis of expected return. Every pension scheme will have a scheme-specific funding standard that reflects the maturity structure of the liabilities of the scheme. Secondly, it changes the role of the fund manager. A hierarchical relationship will develop between the investment adviser, actuary and fund manager. The investment advisory function assumes a primacy over the actuarial and fund management functions. Thirdly, it changes the way investment performance is measured. Liability-driven performance measurement and attribution will replace the existing performance measurement framework in the UK. The passively managed components of the pension fund will be judged on the costs of implementation. Only the performance of the surplus assets will be measured on a conventional basis. The Myners Report is summarised and an illustrative statement of investment principles and transparency statement are presented.

Suggested Citation

  • David Blake, 2003. "UK pension fund management after Myners: The hunt for correlation begins," Journal of Asset Management, Palgrave Macmillan, vol. 4(1), pages 32-72, June.
    • Handle: RePEc:pal:assmgt:v:4:y:2003:i:1:d:10.1057_palgrave.jam.2240094
    DOI: 10.1057/palgrave.jam.2240094
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    References listed on IDEAS

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    1. D Blake & B N Lehmann & A Timmermann, 2002. "Performance clustering and incentives in the UK pension fund industry," Journal of Asset Management, Palgrave Macmillan, vol. 3(2), pages 173-194, September.
    2. Blake, David & Lehmann, Bruce N & Timmermann, Allan, 1999. "Asset Allocation Dynamics and Pension Fund Performance," The Journal of Business, University of Chicago Press, vol. 72(4), pages 429-461, October.
    3. Haberman, Steven & Sung, Joo-Ho, 1994. "Dynamic approaches to pension funding," Insurance: Mathematics and Economics, Elsevier, vol. 15(2-3), pages 151-162, December.
    4. Blake, David, 2003. "Pension Schemes and Pension Funds in the United Kingdom," OUP Catalogue, Oxford University Press, edition 2, number 9780199243532.
    5. Blake, David, 1998. "Pension schemes as options on pension fund assets: implications for pension fund management," Insurance: Mathematics and Economics, Elsevier, vol. 23(3), pages 263-286, December.
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    Cited by:

    1. Baranova, Yuliya & Douglas, Graeme & Silvestri, Laura, 2019. "Simulating stress in the UK corporate bond market: investor behaviour and asset fire-sales," Bank of England working papers 803, Bank of England.
    2. Jean Chateau, 2006. "Disparities in Pension Financing in Europe: Economic and Financial Consequences," Working Papers 2006-09, CEPII research center.
    3. Gordon L Clark & Adam D Dixon, 2024. "Legitimacy and the extraordinary growth of ESG measures and metrics in the global investment management industry," Environment and Planning A, , vol. 56(2), pages 645-661, March.
    4. Douglas, Graeme & Roberts-Sklar, Matt, 2018. "What drives UK defined benefit pension funds' investment behaviour?," Bank of England working papers 757, Bank of England.

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    More about this item

    Keywords

    pension fund management; strategic asset allocation; pension liabilities; performance measurement; Myners Report; scheme-specific funding standard; statement of investment principles;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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