LONDON, 29 July 2019 – Willis Towers Watson has today released its latest figures for 10-year fiduciary management performance which showcase the superior outcomes achieved for its UK delegated clients.
Willis Towers Watson’s fiduciary management clients – consisting of UK Defined Benefit (DB) pension schemes ranging from £50m in size to over £3bn in assets – have seen their funding levels improve by 23.1 percentage points over 10 years to 31 March 2019. This is 2.6 times the improvement seen by the average UK DB pension fund which saw an 8.8 percentage points improvement over the same period. The comparison is on a similar basis using information from the Pension Protection Fund.
“The key to this out performance - achieved with less than 40% of the funding level volatility - was protection against falling gilt yields, greater portfolio diversification and strong manager selection. Willis Towers Watson also supports performance disclosure groundwork carried out by ICSelect.”
Pieter Steyn
Head of Delegated Investment Services UK, Willis Towers Watson
Pension schemes benefited from strongly positive equity returns during the period, but falling gilt yields acted as a major drag on funding levels unless the risk was removed via liability hedging. This technique shields pension funds from unexpected changes, which Willis Towers Watson employed, whilst the average DB fund remained heavily exposed to changes in gilt yields.
Additionally, Willis Towers Watson’s delegated client funds achieved less than 40% of the funding level volatility of an average DB fund, as a result of greater portfolio diversification.
In releasing the statistics, Willis Towers Watson showcases the value of high quality risk management. It also supports the important groundwork carried out by ICSelect, which has now made it possible for pension funds to request like-for-like performance track records from fiduciary management providers. These track records are presented as composite returns vs liabilities for different levels of target return.
Pieter Steyn, Head of Delegated Investment Services UK, Willis Towers Watson said: “After 10 years of careful management of our clients’ assets, it is very pleasing to report such strong outcomes. They have seen extremely smooth funding level progress over time and are well positioned for an increasingly uncertain environment ahead.”
Willis Towers Watson’s Investments business is focused on creating financial value for institutional investors through its expertise in risk assessment, strategic asset allocation, fiduciary management and investment manager selection. It has over 900 colleagues worldwide, assets under advisory of over US$2.6 trillion and over US$120 billion of assets under management.
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has over 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential.
Please note that investment returns can fall as well as rise and that past performance is not a guide to future investment returns.
Purpose
The Willis Towers Watson client composite performance is intended to provide an indication of how investment using a more diversified and risk managed approach, as implemented for our UK delegated client portfolios, compares to the estimated funding level progress of the average UK pension scheme based on information from the PPF 7800 Index released by the Pension Protection Fund (PPF).
Willis Towers Watson Client Index composition
The performance data is an equally weighted composite of total scheme performance of Willis Towers Watson’s UK full scheme delegated investment services (DIS) clients. The composite includes nine clients at the outset and thirty nine at the end. With a total of forty two clients over the period. The composite includes only UK DIS clients where we manage the entirety of their assets, and includes some where there are constraints on our investment decision making, such as the level of liability hedging. It excludes client portfolios where our mandate covers only a portion of a scheme’s assets e.g. a single asset class mandate, or return seeking assets only mandates.
Limitations
Our clients have differing objectives, investment beliefs, valuation methodologies and constraints which they place upon us. All of these can influence the exact portfolio we construct, and therefore the performance that is achieved. Additional governance and operational benefits of investing through our DIS service are not captured in this composite. The funding level progression is shown on a gilts funding basis. Where gilts flat basis is not available we have used the closest similar basis. The funding level shown for Willis Towers Watson clients includes contributions.
Average pension scheme
Based on the PPF7800 Index released monthly by the PPF. We convert the index’s reported average funding level on a PPF basis to a gilts basis by adjusting for differences in the underlying assumptions and benefit levels. The average scheme funding level shown is a weighted average on a gilts flat basis and includes contributions. The contributions received by the average UK scheme may be different to that received by Willis Towers Watson clients.
Time period
The starting point of March 2009 was driven by Willis Towers Watson having a suitable number of clients in order to form a composite whilst also being able to source consistent data from the PPF.
Disclaimer
Towers Watson Limited (trading as Willis Towers Watson) has prepared this material for marketing purposes only and it should not be considered a substitute for specific professional advice. In particular, its contents are not intended by Willis Towers Watson to be construed as the provision of investment, legal, accounting, tax or other professional advice or recommendations of any kind, or to form the basis of any decision to do or to refrain from doing anything. As such, this material should not be relied upon for investment or other financial decisions and no such decisions should be taken on the basis of its contents without seeking specific advice.
This material is based on information available to Willis Towers Watson at the date of this material and takes no account of subsequent developments after that date. In preparing this material we have relied upon data supplied to us by third parties. Whilst reasonable care has been taken to gauge the reliability of this data, we provide no guarantee as to the accuracy or completeness of this data and Willis Towers Watson and its affiliates and their respective directors, officers and employees accept no responsibility and will not be liable for any errors or misrepresentations in the data made by any third party.
This material is provided to you solely for your use, for the purpose indicated. It may not be provided to any other party without Willis Towers Watson’s prior written permission, except as may be required by law. In the absence of our express written agreement to the contrary, Willis Towers Watson and its affiliates and their respective directors, officers and employees accept no responsibility and will not be liable for any consequences howsoever arising from any third party's use of or reliance on this material or the opinions we have expressed.
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