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October 7, 2020
clock 5 MIN READ

Which schemes need to re-tender? 

In June 2019, the Competition and Markets Authority (CMA) published an order requiring defined benefit pension schemes that had not gone through a competitive tendering process to re-tender for fiduciary management services. According to the order, a ‘competitive tender process’ involves obtaining bids from at least three fiduciary management providers. An audit trail of the process is also required, and this can be accomplished through minutes of the regular trustee meetings. The deadline for complying is currently June 2021.

Can you choose to stay with your existing FM in a re-tender?

If you are happy with your existing fiduciary manager (FM), or if it doesn’t make sense to change providers (e.g., you are close to buyout), the CMA order may still require you to undergo a re-tender process. Additionally, the process could benefit you by increasing your understanding of products and services available in the market and ensuring that your existing FM offering is still in line with your scheme’s goals.

If this describes your situation, you can run a streamlined (or ‘light-touch’) tender process, which will comply with the CMA’s regulations. Start by identifying a few (at least three) FM firms that you wish to engage with. Then issue a questionnaire to those firms (for example, our RFP tool generates a question set based on your scheme’s needs).

Here are some possible topics to question providers on:

  • Organisation
  • Client base and experience
  • Asset allocation/liability modelling capabilities
  • Investment management research and risk management capabilities
  • Client service team
  • Performance and reporting
  • Transition management
  • Compliance and conduct
  • Commercials

If you’re satisfied with their responses, you can make a decision or invite other schemes to conduct site visits or make video pitches in lieu of in-person meetings. A presentation gives you a chance to ask questions and get a more holistic view of the team’s capabilities.

Do I need third-party assistance? 

You can run either a streamlined or a full re-tender process on your own, with or without third-party (consultant) assistance.

Streamlined Full
Test
  • Fees
  • Solution
  • Performance
Test
  • All aspects of proposition
Process
  • Short RFP with fee quote
  • Confirm suitability of current solution (perhaps with renegotiation of commercials)
Process
  • Whole of market assessment to create shortlist
  • Long RFP issued
  • Manager presentation day/site visit
  • Final selection process
  • Legals reviewed
  • Assets transitioned
Recordkeeping
  • Process minuted
  • Letter written to FM confirming competitive tender undertaken
Recordkeeping
  • Process minuted
  • Letter written to FM confirming competitive tender undertaken

 

You can choose to use a third-party evaluator if you lack the time or resources to run a process on your own. Be aware that investment consultants that provide competing services may have conflicts of interest.* While that doesn’t need to be a barrier to working with an investment consultant, you should know how such conflicts could affect your scheme, and you should ask the provider how they would mitigate potential conflicts before you decide to proceed.

What should you look for in a fiduciary manager? 

Because organising a tender process can be time-consuming, you want to make sure you’re getting value from the provider. Keep this criteria in mind:

Are FM providers solution-driven?

  • Your FM provider should deliver a solution customised to your objectives, whether that’s self-sufficiency, buyout, etc. No matter the size of your scheme, the provider should be able to build a tailored solution for you.

Do FM providers offer an evidence-based approach?

  • Look for investment approaches that are time-tested and proven to offer the best chance of a positive investment experience over the long term.

Do FM providers offer best-of-breed?

  • Look for best-in-class access to investments, technologies and customised advice.

Does COVID-19 affect the re-tender process? 

So far, no extension has been granted, so the re-tender processes must be completed by June 2021. As described above, prior to the pandemic, site visits were a regular part of the re-tender process. Due to COVID-19, these meetings are generally happening virtually.

What else should trustees be aware of? 

The Pensions Regulator (TPR) lays out detailed guidance for trustees on the best way to approach a tender process. You can also read the CMA’s full order to learn more about the industry.

SEI can help you run a tender process and can provide a list of FM providers and third-party evaluators to help you make your decision. For more information, contact us at institutionsuk@seic.com.

*For this reason, SEI chose to divest its investment consulting business in the 1990s. We now only offer fiduciary management services.

This document contains marketing material about our fiduciary management service. This document does not represent impartial advice on this service. In certain cases, you are required to conduct a competitive tender process prior to appointing a fiduciary manager. Guidance on running a tender process is available from the Pensions Regulator

While considerable care has been taken to ensure the information contained within this document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information and no liability is accepted for any errors or omissions in such information or any action taken on the basis of this information.

Investment in the range of SEI's Funds are intended as medium-to long-term investments. The value of an investment and any income from it can go down as well as up. Investors may get back less than the original amount invested.

The opinions and views in this commentary are of SIEL only and are subject to change. They should not be construed as investment advice.

This information is issued by SEI Investments (Europe) Limited ("SIEL") 1st Floor, Alphabeta, 14-18 Finsbury Square, London EC2A 1BR, United Kingdom. SIEL is authorised and regulated by the Financial Conduct Authority (FRN 191713). SEI sources data directly from FactSet, Lipper, and BlackRock unless otherwise stated.
 

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