Investment management agreements—trustee considerations
Produced in partnership with Martin Scott of gunnercooke LLP
Investment management agreements—trustee considerations

The following Pensions guidance note Produced in partnership with Martin Scott of gunnercooke LLP provides comprehensive and up to date legal information covering:

  • Investment management agreements—trustee considerations
  • Appointment and responsibility
  • Investment objections and restrictions
  • Management benchmark
  • Delegation
  • Standard of care
  • Liability and indemnity
  • Termination rights
  • Conflicts of interest
  • Commission
  • more

The management of assets belonging to another person on a discretionary basis is a 'regulated activity' overseen by the Financial Conduct Authority (FCA). As a rule trustees will not usually be authorised by the FCA to manage most types of assets under a pension scheme. This means trustees will need to delegate their decision making on the day-to-day management of the scheme's assets a party authorised by the FCA to carry out that investment on their behalf.

The appointment of an investment manager (the Manager) is a common form of delegation of their main investment duties by pension scheme trustees. By appointing a Manager under a discretionary investment management agreement (an IMA), the trustees are delegating their discretionary investment powers. The scheme's employer may also be a party to the IMA in order to satisfy the requirements relating to the recovery of VAT—for further information, see Practice Note: VAT and pension scheme costs.

Unlike with investment advisory agreements or non-discretionary management agreements, the Manager will have the discretion and authority to enter into transactions on behalf of the trustees and therefore it is extremely important the trustees are aware of the exact service they are contracting for.

In addition, there are a number of other commercial and regulatory considerations that trustees should bear in mind. This Practice Note sets out the main areas for