Advisory firm PIRC takes on State Street’s UK local authority pension fund analysis business

Move for the former WM business in response to demand from pension fund clients

Corporate governance research and proxy voting firm PIRC has taken on State Street’s Local Authority Universe service, a fund-by-fund analysis of the UK’s local government pension schemes (LGPS) and their investments.

The analytics service was previously operated by WM, formerly part of Deutsche Bank’s wider services and more recently a wholly owned subsidiary of State Street, under Karen Thrumble and David Cullinan, both of whom will now work with PIRC in developing the next tranche of data for publication in November 2016. Financial terms of the deal weren’t disclosed.

A statement released by PIRC said that it intends to continue producing quarterly aggregate analyses that “will initially replace” State Street’s report while also “improving upon the data quality and depth of analysis”.

PIRC plans to integrate data previously collected by State Street into its own research to create a “historical time series” but will require participating funds to supply the older data points. The proxy advisor also points out that collected information remains property of individual LGPSs, as only aggregate results and analysis are available for purchase.

The move was precipitated by local authority funds themselves, says Thrumble, who now will take on the role of Head of Performance Services at PIRC. The funds had urged State Street to keep providing data on local authority funds once the investment manager disposed of similar analytics services for charities and corporate pensions.

She added: “When State Street decided to withdraw from those other markets, it was individual local authorities and bodies who said they still needed this information – and needed it in a robust format.“This way, it means that people understand and can trust the data. That’s why David and I wanted to remain involved.”

Thrumble also points out that such analysis will become even more important should the UK Government’s plan to pool local pension schemes together come to fruition. PIRC’s statement explains that though individual LGPSs separately determine their asset allocations and managers, decisions about both require monitoring and review according to “long term results” either by the pools themselves or, at a higher level, the Government.

PIRC adds that it will not be focusing on core performance metrics, as most LGPSs already receive such information through custody services and the cost of obtaining index data is ever-increasing.

According to Thrumble, the LGPS analytics service was available to a number of interested parties but PIRC were identified due to a lack of a vested interest and an existing relationship with the Local Authority Pension Fund Forum (LAPFF), its research and engagement partner since 2010.

Speaking about future themes of PIRC’s research, Thrumble added: “I think governance is going to become an ever-bigger issue. People are also struggling with the nature of fiduciary responsibility, and whether it’s better to maximise returns or go down a more socially responsible route. There may be more focus on that that comes with increased access to such investment vehicles”.

As reported on RI, local authority pension funds are also under pressure to disclose how they manage climate risk. A letter written by environmental campaigners Friends of the Earth has asked LGPS directors and trustees to evaluate the material financial risks associated with climate change as part of their fiduciary duty.