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Critical ESG Themes for 2015
Are asset managers sufficiently long-term focused for asset owners?

Universal ownership applying inclusive and integrated long-term finance
 Goal of securing fair outcomes for all stakeholders over time
 Framework and strategy that integrates long-term extra-financial
opportunities
 Long horizon investing carries opportunities and responsibilities
 Every long-term investor is also a short-term investor
 The long-term investing opportunities need to be realised through
technical and cultural excellence
 Long-term mandates for asset managers
 Design and experience has evolved
 This mandate has a track record of considerable success
Roger Urwin
Global Head of Investment Content
1 April 2015
© 2010 Towers Watson. All rights reserved.
Long-horizon investment
Opportunity for long-horizon investors to do better than short-horizon investors


Investment strategies

Access to certain systematic investment factors which exploit the
mispricing of assets

Exploiting mean reversion effects (ie the tendency of asset prices to
move around an average value over time) in securities prices

Earning an illiquidity premium

Improving corporate wealth creation through investee - company
engagement
Investment processes

Long-term investing requires technical and cultural attributes

Fees, costs and incentives must be integrated

Measurement, benchmarks and KPIs all contribute
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Long-term mandates
Performance guidelines
Fee basis
Guidelines/monitoring
Compare with target of
CPI+6% pa over rolling
periods of five years, on
total return and income
return
80% (say) of the fee is on a
fixed basis supporting the
core elements of the
mandate (securing the
manager’s capacity)
Guidelines specify
incorporation of
sustainability considerations
in process (ESG, other
longer term risks)
Consider also:
• Target risk relative to
benchmarks
• Target performance
relative to World Index
20% (say) of fee is
budgeted to come from
performance versus targets
over rolling five years
(supporting profit and
comp)
Meeting/monitoring focus:
• Valuation metrics
• Turnover
• Longer-term risks and
performance
• Skill and process review
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Roger Urwin
Roger assumed the new post of Global Head of Investment Content in July 2008 after acting as the
Global Head of the investment practice from 1995 to 2008. Roger joined Towers Watson (then
Watson Wyatt) in 1989 to start the firm's investment consulting practice and under his leadership the
practice grew to a global team of 500. His prior career involved heading the Mercer investment
practice and leading the business development and quantitative investment functions at Gartmore
Investment Management.
Roger’s current role includes work for some of the firm's major investment clients both in the UK and
internationally. He is also involved with the Towers Watson thought Leadership Group (Thinking
Ahead Group). He is the author of a number of papers on asset allocation policy, manager selection
and governance. He is on the Board of the CFA and an Advisory Director to MSCI Inc.
Roger has a degree in Mathematics from Oxford University and a Masters in Applied Statistics also
from Oxford. He qualified as a Fellow of the Institute of Actuaries in 1983.
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© 2010 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.