One of the aspects of investing that I continue to find extraordinary is how difficult it is to actually find where your funds are invested.
After all, that money you hand over to a pension company or investment house is yours. They become the custodians of it, not the owners.
So as an investor you should be entitled to know where it is going. The details of your investments should be easily accessible and relatively recent.
As to why this is important, I turn to Sir Mark Rylance and a group of 54 other actors and performers who complained about Sadler’s Wells theatre’s partnership with Barclays.
The bank pays for 10,000 tickets a year to be sold at £10 to people aged 16 to 30. But it is also Europe’s largest financer of fossil fuel and so the actors, some of whom were members of their union Equity, objected.
I’m always entertained by people who suddenly take an interest in a company’s investments, because I know how little scrutiny they have probably paid to their own holdings. It’s like the people who complain about the damage meat production does to the environment while they tuck in to an avocado that’s travelled half the length of the planet to arrive on their plate.
My interest was piqued, so I took a look at the Equity pension fund, which is provided by Aviva.
As you would expect, it offers a vast fund choice to members of this scheme, but the default option is the Aviva Mixed Investment (0-35 per cent shares).
Let’s assume that actors are no different to normal investors and that the vast majority have failed to move their money from this choice.
I spent 10 minutes or so ploughing through the pension fund documents on the Equity website and discovered no information on investment holdings.
So then I headed over to Aviva’s website. Negotiating the various options to find this fund takes a while, but once you get there you can see the most recent factsheet. This reveals that the fund invests mostly in government gilts and also corporate bonds. Some 3.6 per cent is in financial stocks. So, what specifically? Of course, you can’t find out because none are in the top ten holdings.
I asked Aviva for the annual report which in a retail Oeic would be publicly available. It said I could not have it.
Finally, after some to-ing and fro-ing it told me that in this fund holdings of the big five banks, including Barclays and HSBC (which is the second biggest financer of fossil fuels), account for 0.7 per cent for equities and
1.5 per cent for bonds, meaning the actors demanding Sadler’s Wells stops its partnership with Barclays are in some cases, invested in Barclays themselves.
I’m sorry to pick on Aviva in this instance, because it is behaving no differently to most of this industry, but this does highlight the disclosure rules between retail investing and pension investing.
They are two-fold: the FCA business conduct handbook says firms must provide a portfolio statement prepared in accordance with the requirements of the IMA statement of recommended practice. In turn, this says: “A list of all a fund’s investments is required as part of the authorised fund manager’s report in both the annual and half-yearly reports.”
These don’t govern pension funds, even auto-enrolled ones, but they should because the principles are the same. It represents accountability and transparency.
The counter argument used by the industry is that fund managers should not be asked to disclose their holdings because it would let their rivals know what they are doing.
Frankly, what hogwash. If anything, this is a good argument for disclosure, because if any pension fund manager is trading in such a way then investors should really be told.
And besides, no-one is asking for daily trading updates, just quarterly disclosure on full holdings.
Schemes also argue that no-one is interested in their holdings because no-one ever asks. This would only be a valid argument if they were easy to find in the first place.
Pension schemes talk all the time about engagement and ways to get investors involved with their savings, but the biggest way to achieve this is by more disclosure and more thought into how we can give investors the information they may need.
In a world in which pension schemes are being put at the forefront of ESG, they should be setting a higher standard with their own transparency.