Mathias Rasmussen Director, Investment Consulting
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10-second summary
Without a speedometer, it’s difficult to judge how fast you’re going and it's likely you'll get a speeding ticket. And if the speedometer takes any longer than a second to update, it means you’ll be basing your driving on stale information. The same principle can be applied to investment decision-making. Does it really make sense to base vital investment decisions on months-old data? And is it necessary to wait an entire quarter to sign off small changes to your portfolio? We don’t think so, which is why we developed Ada Fintech (Ada), a technology platform that helps our clients make more efficient and better-informed decisions.
How do we approach tech-based governance at Redington?
It’s generally well accepted that strategic investment decisions – such as agreeing on target returns and asset allocation – are among the most impactful that trustees can make in determining the long-term success of their pension scheme. Having access to an effective tech-based governance solution enables those decisions to be driven by up-to-date (rather than stale) information, and portfolio construction to be monitored and managed in a live environment instead of waiting until the next quarterly meeting. It also saves time and investment advisory fees.
Pitstop 7: tech-based governance Keeping your speed in check
Every Redington client is set up on our tech-based investment governance tool, Ada, enabling us to carry out strategic asset-liability analysis to precisely the same standard and sophistication you’d expect from a typical quarterly investment report. But there are two key differences:
Firstly, Ada isn’t just a snapshot of a scheme’s position at the end of the previous quarter. Instead, it uses the latest available data to estimate current asset and liability values. This gives you a clear sense of whether your scheme’s on track for its strategic objectives in light of market developments post-quarter-end. It also helps you identify opportunities that you wouldn’t be aware of if you only ever looked at quarterly intervals – for example, an opportunity to de-risk.
Secondly, Ada allows you to fully understand the impact on your scheme’s objectives of tweaking asset allocations and hedge ratios on the fly. This allows you to effectively work through iterations to your investment strategy that could take multiple meeting cycles to get right.
How does this benefit our clients?
Having the right tech-based governance solution has transformed how our clients run their meetings. Instead of scrutinising outdated, quarter-end investment reports and waiting weeks to understand the impact of what’s happening in today’s markets, many use Ada to review their scheme’s current position against objectives and consider any immediate actions that should be taken in response.
Ada has also improved and sped up the decision-making process – de-risking or adjusting asset allocations no longer requires separate papers to be commissioned and submitted for the next meeting as the necessary information is readily available and robust decisions can be discussed and taken today.
Redington’s advice is focused on outcomes and how Ada can be used to achieve this, it’s an integral part of the meeting and not just used for the sake of it. It allows us to focus on what’s important and accelerate the decision making process. We got a year’s worth of investment strategy iterations done in one three-hour meeting.