LONDON, 9 September 2013 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), today announces the findings of its Delegated Investment Survey 2013 which shows an increasing commitment to delegated investment strategies among UK pension schemes.

The survey of 275 UK defined benefit (DB) pension schemes of all sizes, representing around £130 billion of assets, found that 36 per cent of respondents have appointed a delegated investment provider (or fiduciary provider as it is also known), an increase from 18 per cent in 2011. This increase has been driven by a combination of factors putting pressure on trustees and sponsors alike, including rising scheme deficits, market volatility, increasing investment complexity and the growing number of scheme closures to new entrants and future accrual.  All these mean reduced time-scales to reach a fully funded state. Aon Hewitt expects this trend to continue over the next few years and anticipates a 40-50 per cent year-on-year increase in the number of schemes electing to delegate their investment strategy. 

Sion Cole, partner and head of client solutions for Aon Hewitt's delegated consulting business said:

“Ongoing market uncertainty and volatile returns in recent years have led pension scheme trustees to consider a wider range of asset classes as they seek both to smooth funding level volatility without sacrificing returns and to align their assets more closely with their liabilities. This trend towards increased diversification has seen a marked increase in the number of schemes opting to delegate to expert providers the day-to-day investment decisions and management of their portfolios.

“In the last three years, five per cent of all the DB schemes in the UK have moved to a fiduciary management approach. This is a remarkably quick uptake within an industry which is typically much slower to move. We believe this momentum will continue and we expect to see 25 per cent of all UK DB pension schemes committed to delegated investment within the next five years."  

Sion Cole continued:

"Delegating investment is no longer a new concept. It is now an established solution to the challenges that face the pensions industry.  With the number of success stories where fiduciary management has improved funding levels, reduced volatility and enhanced the risk/return profile of schemes' portfolios, it is not surprising that trustees are turning towards it in growing numbers - all with the ultimate aim of offering better security to their members.”

Increased access to expertise

The survey reveals that the principal driver behind the growing demand for delegated services has been the desire of trustees to increase their access to the expertise of investment professionals.  With ongoing market volatility, delegating investment responsibilities to third party experts has become an increasingly popular solution and offers trustees a number of wider benefits.

Sion Cole said:

“By delegating their investment strategy to a trusted third party, trustees can ensure that their scheme’s investments are proactively managed by those with the expertise, resource and infrastructure to do so. Under traditional frameworks, increasing portfolio diversification was often a slow and expensive process that could see a scheme contracting directly with 10-20 underlying fund managers. By outsourcing its investment strategy to a fiduciary provider, a scheme can now move into new assets faster and more efficiently while benefitting from the fee savings and preferential terms that many of the leading providers are able to negotiate on behalf of their clients with the underlying managers, .  

“This cost efficiency and access to expertise is especially appealing to small and mid-sized schemes where trustees often have limited resources to handle their portfolio quickly and effectively. For these schemes, the fiduciary approach opens up a broader range of investment strategies which were previously only viable for larger schemes.”

Other key findings of the survey include:

-Levels of diversification are increasing, with 63 per cent of schemes holding five or more different asset classes, up from 32 per cent in 2012.

-More than half of respondents say that trustees initiate the decision to delegate.

-59 per cent of respondents say their schemes now have flight plans, which makes them more likely to have delegated investment.

- Ends -

Notes to editors

About the 2013 Delegated Investment Survey

Now in its fourth year, the Aon Hewitt Delegated Investment Survey attracted responses from 275 schemes representing around £130 billion of defined benefit pension assets, roughly 13% of the UK DB market.

Copies of the survey are available from http://www.aon.com/unitedkingdom/fiduciary-management/delegated_investment_survey.jsp

Aon Hewitt Investment Consulting

Aon Hewitt Investment Consulting provides institutional investment advisory experience and knowledge to over $4 trillion assets throughout the world. Our services include Alternative Financing, Compliance/Operational Due Diligence, Custody, Delegated Consulting, Flight Planning , Global Asset Allocation, Governance, Liability Management, Manager Research, Risk Management, Risk Modelling, Risk Settlement and Transition etc. Our capability is founded on a large and diverse team of investment specialists who include former fund managers, investment bankers, economists and financial analysts among others.

About Aon Hewitt

Aon Hewitt empowers organisations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organisational and personal performance and growth, navigate risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness.  Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide.  For more information on Aon Hewitt, please visit www.aonhewitt.com. 

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About Aon

Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 65,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon’s global partnership and shirt sponsorship with Manchester United. 

Media Contact:
Colin Mayes
Aon Hewitt
01372 733689
colin.mayes@aonhewitt.com

Giles Abbott
Capital MSL
020 7307 5340
giles.abbott@capitalmsl.com