Pension funds are becoming the “new banks” in terms of lending, but need to be more aware of the high fees often charged by asset managers, according to Tesco’s chief investment officer.
Addressing delegates at the National Association of Pension Funds (NAPF) Investment Conference, Tesco Pension Investment CIO Steven Daniels (pictured) said pension funds have increasingly stepped into the breach left by banks, which have had to unwind their balance sheets and reduce lending activity since the financial crisis.
However, he added such deals would have to be on pension funds’ terms before they committed and warned trustees to pay attention to fees and the underlying structure of investment vehicles before investing in asset classes such as infrastructure and private equity.
In the case of private equity, Daniels said he was happy to pay fees where managers are sharing the return, but claimed many managers have launched funds “for anything” and without proper thought.
He added: “Pension funds are the new banks, but we are not mugs. Call me a cynic but it is just a way of charging us higher fees.”
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