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Lane Clark & Peacock LLP

Service Providers Framework 2020

You are in Investment Consultancy » Manager selection and monitoring

Manager selection and monitoring

IC 12. ESG in manager selection, appointment and monitoring

12.1. Indicate whether you incorporate ESG factors into your manager selection and monitoring services.

Manager selection service

Manager monitoring service

12.3. Additional information. [OPTIONAL]


SELECTION

IC 13. Manager selection activities

13.1. Indicate what activities you undertake during the process of selecting a manager.

Research and screening

Strategy

ESG people/oversight

Process/portfolio construction

Selection process and reviewing documentation

          See additional information.
        

13.2. Indicate whether you use any of the following scores or targets in your manager selection process.

13.3. Additional information. [OPTIONAL]

Any selection process takes account of the scores and qualitative comments developed during our investment manager research, including those relating to RI. Additional weight can be given to ESG/RI as part of the selection criteria based on the client's specific requirements, eg by specifying minimum RI standards that a manager must meet for inclusion in a shortlist.

In our manager research, we assign a responsible investment score between 1 (weak) and 4 (strong) for each manager, covering both their ESG and stewardship practices, adjusting the score for individual funds as appropriate. We incorporate this score in our overall product grading for most asset classes, directly impacting whether products are recommended to clients.


IC 14. Incorporating asset owners’ investment principles in selection of manager

14.1. Describe how you incorporate asset owners` investment principles into the manager selection process.

          Asset owners’ investment principles are incorporated into the manager selection process as a matter of course, and we would give specific principles more prominence for individual clients where appropriate, in line with our tailored approach to giving advice.
        

14.2. Additional information. [OPTIONAL]


IC 15. ESG in selection due diligence

15.1. Briefly describe how you include ESG factors in your due diligence process for manager selection.

          We include ESG factors in the due diligence process at the investment manager research stage, as described above, and this automatically feeds into the investment manager selection process for individual clients. We can also adapt the process to incorporate ESG factors in a more client-specific manner if requested.
        

15.2. Additional information. [OPTIONAL]


IC 16. Monitoring investment managers on ESG

16.1. Indicate whether you set any of the following to measure compliance/progress, or use the following information to review and evaluate the investment manager.

Setting measures for the investment manager as part of the monitoring process

Reviewing and evaluating information from the investment manager as part of the monitoring process

16.2. Describe how you raise and manage concerns when monitoring investment managers on ESG factors.

          We assign investment managers an RI score as part of our manager research programme. When we report these scores to clients, we highlight any “red flag” issues of concern (eg low scores, not a PRI signatory, doesn’t consider ESG issues in the investment process for that asset class). We have facilitated correspondence between some of our clients and their investment managers about ESG and/or stewardship concerns, and we have written to some managers ourselves about some of these issues, encouraging them to improve their RI approach for particular areas of concern. We also give feedback directly to investment managers if they request it.
        

16.3. Additional information. [OPTIONAL]

Our answers to IC16.1 reflect our standard approach for all clients. Some clients have specific requirements that we incorporate in our monitoring services on a bespoke basis, such as reviewing compliance with their investment restrictions.


IC 17. Reporting back to asset owners

17.1. Indicate whether you report back to asset owners on your manager selection and/or monitoring activities.

17.2. If yes, describe how you report back and the frequency.

          The standard is for clients (asset owners) to receive a comprehensive monitoring report once a quarter. The monitoring report covers many aspects of the client’s portfolio and investment objectives. In these reports we will show:
•	Investment performance of each manager’s portfolio compared against a suitable benchmark. This will cover various time periods and will usually include the period since the manager was appointed.
•	A review of our findings of monitoring each manager against other criteria: how the business is structured to deliver investment performance; the quality of the people involved; the process used to create portfolios; and how responsible investment is integrated into that process.
In addition, we will report to clients, outside of the regular reporting cycle, any significant news that affects any of its managers.
We also provide information on the performance of the clients’ total portfolio. This data is shown either gross or net of asset management fees, depending on client preference. We provide performance over short, medium- and longer-term periods and shown with an appropriate benchmark in order to provide context.
In monitoring investment managers, we will proactively raise with them any significant concerns we have about their processes for monitoring and selecting investments; this includes ESG considerations.
        

17.4. Additional information. [OPTIONAL]


IC 18. Demonstrating value on manager selection, appointment and monitoring

18.1. Describe how you measure, track or otherwise demonstrate your value on manager selection and monitoring services.

          We demonstrate the value of our manager selection and monitoring services for each client by reporting on its managers. For each manager appointment, we measure the investment return of the portfolio and, where applicable, the benchmark return as a comparison. The objective of the manager varies across asset classes, mandate-type and manager.

For active mandates in an asset class with a well-constructed index or other comparator, we evaluate whether the manager has added value through investment performance in excess of the index and done so within expected risk constraints.

For other mandates, we add value primarily through risk control and demonstrate this through monitoring factors such as: volatility of investment return (as a proxy for potential of loss); consistency of the achieved investment returns with the stated investment process; operational processes and controls being followed; changes to senior investment staff; changes to third-party service providers; changes to investment process; and changes in the approach to responsible investment.

Each client is provided a regular, usually quarterly, report highlighting these performance and risk monitoring indicators.

As part of a tender, when the services offered and the client circumstances are appropriate, we may provide prospective UK pension scheme clients with an analysis of the performance of our average client compared to its liabilities.
        

18.2. Additional information. [OPTIONAL]


IC 19. ESG in manager selection, appointment and monitoring (Private)


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