PENSION funds are weighing up plans to rank fund managers based on their efforts to improve performance at the companies they back, in the latest sign of institutional investors flexing their muscles.
The National Association of Pension Funds is leading a campaign to develop a framework that would rate fund managers according to their work towards, for example, improving governance at companies.
Pension funds own billions of pounds of assets which they outsource to fund managers, which manage them on their behalf.
The framework is based on the ‘2020 Stewardship’ report by a group of six institutional investors including some of Britain’s largest pension schemes such as the Universities Superannuation Scheme and Railpen.
Talks with the NAPF, whose members represent some £800 bn in assets, revolve around a matrix system, grading asset managers based on how much or how little they do on the governance front.
Although details are still being worked out, the framework is likely to be publicly accessible online. In the immediate aftermath of the financial crisis, pension funds were accused of not demanding greater accountability from companies they invest in, especially banks.