Hilton enhances fid man role to reduce volatility

The model has enabled the scheme to be more nimble when making management and investment decisions, Michael Coletta, a member-nominated trustee for Hilton UK’s defined benefit pension scheme, said at the National Association of Pension Funds' annual conference on Thursday. 

“If you’re tied up in things you’re not used to dealing with like a pension scheme, that’s going to slow you down and potentially you’re going to make the wrong decisions and have more risk,” said Coletta. 

As long as it’s within our benchmarks we have to rely on the advice we’re getting

The scheme previously delegated manager selection and portfolio construction and allowed their fiduciary managers narrow deviations from the market when investing.

It now delegates the asset allocation of their growth portfolio within guidelines and has set a mandate for returns of RPI plus 4 per cent within that portfolio.

Hilton is planning to remove restraints on their fiduciary manager’s ability to leverage within their matching portfolio and to delegate its funding level-based risk allocation.

The scheme has 65 per cent of its assets assigned to growth, with the remainder as part of a matching portfolio. The defensive position of the scheme’s portfolio has increased throughout the year.

When asked how trustees become comfortable that the cost of transactions does not exceed returns, Coletta told delegates representatives monitor their fiduciary manager’s performance through quarterly reports.

The scheme asks for detail on changes made to certain aspects of its strategy, of which management changes is one. Trustees also look at the returns achieved in relation to targets they have set, he added.

“As long as it’s within our benchmarks we have to rely on the advice we’re getting, we have to trust our advisers and I think that’s a really important part,” said Coletta.

The scheme has had 24 manager changes so far this year. Shamindra Perera, managing director of institutional investment services at Russell Investments, which is the fiduciary manager for Hilton UK, said while this may appear a lot, it is in part down to the fact one portfolio change affects the rest. 

“When we introduced absolute return bond managers — that was about five managers — the portfolio already had some exposure to active currency management,” he said.

“The absolute return bond managers use active currency as one of the signals they use to determine their absolute return; you don’t then need another five managers who are just doing active currency alone,” he added.