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Universities Superannuation Scheme - USS

PRI reporting framework 2018

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Outsourcing to fiduciary managers and investment consultants

SG 12. Role of investment consultants/fiduciary managers

New selection options have been added to this indicator. Please review your prefilled responses carefully.

12.1. Indicate whether your organisation uses investment consultants.

12.2. Indicate how your organisation uses investment consultants in the selection, appointment and/or monitoring of external managers.

Asset class

12.3. Indicate if your organisation considers responsible investment in the selection, appointment and/or review processes for investment consultants.

Asset class

12.3. Indicate if your organisation considers responsible investment in the selection, appointment and/or review processes for investment consultants.

12.4. Indicate whether you use investment consultants for any the following services. Describe the responsible investment components of these services.

Describe how responsible investment is incorporated

          We do not outsource decision making to investment consultants or have formal selection processes for consultants. However, we may use consultants' on an ad hoc basis to consider their opinions, resources and insights to help inform debate within USS's internal investment teams. For example, consultants' perspectives may feed into the identification of service providers or best practice ideas from across the market.
        

Describe how responsible investment is incorporated

          For the indirect property investments USS's in-house team use the support of an investment advisor to monitor international funds.
        

Describe how responsible investment is incorporated

          Investment consultants' research helped to inform the delivery of the USS Investment Builder - the new defined contribution (DC) section of the scheme. Discussions were held with more than one investment consultancy firm to collect inputs on a variety of matters. These helped the scheme's internal Strategy Coordination (StratCo) team to identify the most appropriate options and best delivery solutions for the new DC offerings, including USS's ethical and Sharia-compliant funds, the Ethical Lifestyle strategy.
However, all investment mandates, product development, implementation and fund manager selection is undertaken in-house.
        

Describe how responsible investment is incorporated

          For the directly held property assets USS use an external sustainability consultant to assist the scheme in monitoring and reporting on its ESG performance.
        

12.7. Additional information [Optional].

USS acknowledges the significant influence consultants have over smaller schemes who depend heavily on their advice and input into asset management selection and oversight. The scheme has worked on RI projects with investment consultants in the past and continues to engage with the consultant market at industry events and through the scheme's investment and advisory activities.

During the year, USS fed into discussions about responsible investment and the role of investment consultants at several fora, such as the PRI's Policy Advisory Committee and UK Pension Funds Roundtable events. Discussions noted a need for research and innovation from consultants on RI, a knowledge gap on RI between consultants' spokespersons and field consultants and the lack of tools for consultants advising on custodian appointments to assess performance on global proxy voting.

USS contributed to discussions with the PRI's Policy Advisory Committee and Sustainable Financial System's Advisory Group (which USS participated in) on the role of consultants: these helped inform the publication of the PRI's Investment Consultants Services Review in December 2017 - see https://www.unpri.org/sustainable-financial-system/investment-consultants-services-review/571.article. Both the PRI and UK Pension Fund Roundtable are continuing their focus on investment consultants in 2018. USS will continue to participate in these initiatives.

The scheme is also conscious of the potential conflicts inherent in the current investment advice market which has become more apparent as investment consultants have moved into fiduciary management services.  With this in mind, USS welcomed the Financial Conduct Authority's proposed market review of the institutional investment advice industry, responding to the FCA's Asset Manager Market Study in February 2017.


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