EDINBURGH - The WM Co., Edinburgh, Deutsche Bank AG's performance measurement subsidiary, is on the brink of losing several key pension fund clients amid continuing dissatisfaction over levels of service.
Industry sources said a number of clients, including the L20 billion ($28.9 billion) Universities Superannuation Scheme, Liverpool, England, and the L4.3 billion BAE Systems Pension Scheme, Farnborough, England, were considering changing service providers because of dissatisfaction over the timeliness and accuracy of WM's performance reports, as well as concern at the high number of recent senior staff departures at the firm.
Peter Moon, USS chief investment officer, did not return calls by press time seeking comment. No one at BAE was available to comment.
The L4 billion Unilever PLC Superannuation Fund, London, earlier this year dropped WM as performance measurer in favor of its global custodian, Northern Trust Co., London, said a plan spokesman.
And Richard Barlow, chief executive of the L22 billion Electricity Supply Pension Scheme, London, another major WM client, said fund officials just completed a review of performance measurers. But Mr. Barlow said he could not yet release the results of the review, although he confirmed that several of the 27 pension plans that make up the scheme already were moved to alternative providers.
"The majority of our funds are using WM, but increasingly that has shifted to (other providers)," he said.
Sale possible
With Deutsche Bank reportedly planning to exit the global custody and passive money management businesses, the threat of further losses has sparked industry speculation that the Frankfurt-based group may consider selling WM. A Deutsche Bank spokeswoman refused to comment.
Several dissatisfied clients interviewed by Pensions & Investments cited inaccurate performance reports, late reporting or concern over staff departures as problems with WM. Other alleged problems included glitches with the company's newly installed software platform, WM Spectrum; spelling and typographical errors; and percentage tables that failed to add to 100 in performance reports.
Large British pension funds use specialists to help identify overall performance of their specialist fund managers.
However, the process of identifying performance can be complicated by the propensity of pension fund executives for frequently changing fund managers, investment strategies or asset allocations.
"It seems to be in those crucial areas that WM seems to struggle (in producing accurate performance reports)," said one client who asked not to be identified.
Accuracy expected
While most of the clients interviewed admitted performance measurement was often a complex task during portfolio transitions, they still expected accurate reporting.
Andrew Kirton, head of U.K. investment consulting at Mercer Investment Consulting, London, said accurate and independent performance reporting are still crucial.
"I still think there's something to be said for independent performance measurement. I still think it is not best practice for pension funds to take their performance from fund managers; independence is important," he said.
Peter Warrington, executive director of WM, declined to comment on the specific complaints. A statement from Deutsche Bank's public affairs office in London said Deutsche officials have "every confidence that we have a stable systems platform on which to deliver our range of products to our clients."
