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Technology > Investment Platforms > Turnkey Asset Management

Most pension assets vulnerable to conflicts of interest

By Warren S. Hersch

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Consulting firms that have one or more conflicts of interest oversee more than half of pension assets reported to be under the care of pension investment consultants, according to new research.

Diligence Review Corp., a New York-based specialty consulting and research firm, unveils this finding in “U.S. Pension Investment Consultants: A Report for Fiduciaries, Internal Audit and Risk Management Professionals.” The January 2013 report discusses findings with respect to pension investment consultants concerning business structures and other business practices that may result in conflicts of interest.

The study’s data is derived from the Form ADV FOIA file, dated January 2, 2013, for advisors registered with the U.S. Securities and Exchange Commission as of December 31, 2012.

The report shows that $707 billion in regulatory assets under management (RAUM) are managed by consultants who say they have one more conflicts of interest. This compares to $498.2 billion in assets managed by investment consultants who are free of conflicts of interest.

The report adds that investment consulting firms that have “significant due diligence concerns” have, on average, more than $18 billion in assets under their supervision (based on 39 of 49 firms reporting a dollar value for RAUM). By contrast, those who are free from broker activity and disciplinary actions oversee an average of $7.8 billion in assets (based on 64 of 106 firms reporting a dollar value for RAUM).

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