Over lunch a year ago Chris Edge and long-time buddy Jo Welman hatched a plan to create a company to aid UK pension trustees to negotiate the murky waters of pension fund investment.
On February 5, Epic Investment Consulting officially opened its doors to pension schemes. EIC is one of three subsidiaries of Epic Investment Partners, where Welman is chief executive. He will also be chairman of EIC.
The idea sprang from Paul Myners’ recommendation in his review of institutional investment in the UK in 2001 that trustees should take increased responsibility for pension fund management. Edge says: “The whole idea is to provide services of investment advice to pension fund trustees.”
Myners also suggested that the roles of actuary and consultant be separated. EIC hopes this will enable it to carve out a niche among the big consultancies such as Mercer and Watson Wyatt. “They’re qualified actuaries and, in the main, haven’t got the same range of experience [as at EIC],” says Edge. In EIC, each of the four involved – soon to be five once the fifth has obtained his FSA certification – have at least 25 years of investment experience.
Edge brings up the rear with 25 years of experience. His first job was as a graduate trainee stockbroker at a firm that has since been subsumed by a larger one. During the 1980s he was a fund manager at Lazard Investors and in the 1990s ran investments at the Family Assurance Group.
The group operated out of Brighton, so Edge and his wife moved with their four sons from London to Sussex. Under Edge’s guidance the investment unit became very successful relative to pension fund investment results.
“In 1997 I managed to persuade Family Assurance to recreate the investment department as Pavilion [Asset Management],” says Edge. Three years later, with around £2.5 billion of funds under management, Family Assurance decided to sell Pavilion because it was not a core business.
After Pavilion he did some consulting work before joining Royal London Asset Management as head of sales and marketing. This brought his work life back to London.
A disagreement Within seven months at Royal London he was on the street again. “It turned out we [Edge and the chief executive] had a fundamental disagreement about the future [of the business],” explains Edge. However, he insists that there is no ill feeling. “I sit on the board of one of the investment trusts,” he says.
His departure was followed by a year out. He spent time consulting under his aptly named Leading Edge Investment Consulting business and contemplated where to go next.
“I decided I wanted to do my own thing,” he says. Although his natural home is fund management he felt it wasn’t the right environment for creating a fund management entity. “But I wanted to be involved in the pensions market,” he adds.
So Epic Investment Consulting was born. “We solely provide investment advice and the key is that we’re FSA regulated,” Edge says. He believes the firm also has an edge on the big consultancies in that it offers independent advice while the others cannot truly offer independent reviews on fund managers when they are aiding in the initial selection of managers. “Inevitably you’re not independent if you’re helping select fund managers and review their performance,” he says.
Edge claims he has been to a trustee meeting with EIC’s first client and fund manager and has already added value. He explains that the fund manager was benchmarking the performance of the pension scheme against its peer group. “I said to the fund manager, given the portfolio target you’re seeking to achieve, do you publish the dispersion of returns among other clients with a similar benchmark?”
The manager said he did, so Edge advised his client to ask to see how the scheme had performed relative to other funds managed. This information is helpful in assessing the performance of the fund manager. Edge adds: “If only Unilever’s trustees had asked Mercury that question they would have found out that it wasn’t being managed the way they thought.”
