Driving powerful engagement and interaction with clients
Kempen Capital Management is a leading specialist asset manager, in addition to providing investment solutions to pension funds, insurers and family offices in the UK, as well as in the Netherlands. Kempen adopted PFaroe in 2017, and currently models approximately £4 billion of UK fiduciary management assets on the platform.
Kempen’s role spans the traditional investment management model; understanding clients’ funding positions, constructing an environment of their liabilities, and conducting asset-liability analysis to inform the creation of optimal investment strategies. Unlike many other providers, Kempen’s approach centres upon working closely with clients to confirm their understanding, before ultimately implementing an investment strategy – in particular, a liability-driven investment programme based upon comprehensive understanding of the liabilities.
With transparency and collaboration integral to Kempen’s business model, PFaroe’s interactive capabilities are revamping the way in which Kempen engages with clients in order to deliver value-added services.
Nikesh Patel, Head of Investment Strategy, Kempen, says: “We are somewhat unique in that we are very open with our clients – allowing them to not only see our investment process, but also to challenge it. PFaroe is reinforcing and strengthening our interactive approach, taking our engagement with clients to a whole new level. For example, we are now able to run live analysis in the room with our clients. PFaroe is a powerful system in terms of allowing clients to gain a clear understanding of positions, strategies and the implications of decisions. This means that our clients can achieve a true and meaningful oversight over the investment duties they have delegated to us.”
By facilitating live demonstrations, PFaroe is driving greater engagement, interaction and collaboration, and enabling clients to take an active role in the investment journey.
“We like to give clients the opportunity to challenge ideas and tweak some of the assumptions to see what the impact is on the modelling,” Patel adds. “In some instances, this can create even more efficient solutions – and is something that we welcome.”
Patel recalls an instance when one of the Trustees of a client suggested a minor shift to one of the asset allocations – approximately 2% between asset classes – which resulted in a marginally more efficient portfolio. Using PFaroe, Kempen was able to analyse this solution in tandem with the clients, subsequently reaching an agreement and implementing the slightly revised portfolio straightaway, without the need to go back and re-run analyses and re-verify numbers.
Patel says: “Kempen still very much leads the development of the solution, but clients have the opportunity to influence the portfolio even up to that final stage – something they really value.”
Efficient and informed decision-making
Kempen makes extensive use of PFaroe’s ‘what if’ capabilities to understand the impact of potential market developments and examine different scenarios, such as ‘what if we increase the amount of cash?’, ‘what if we increase or decrease the amount of time we have got to get to full funding?’ or ‘what if we change the target?’, for example.
“PFaroe is remarkably good at answering those questions on-demand, and allowing clients to understand not only the impact of certain decisions, but also which decisions are important. For example, should they be spending their time on how much they should split between hard currency and emerging market debt, or focusing on their funding horizon? It helps put into perspective which decisions actually matter versus those that are interesting, but not necessarily worthwhile considering in significant detail.”
Utilising PFaroe’s live capabilities to remove a great deal of the ‘back and forth’ that often takes place between asset managers and clients following strategy meetings, Kempen is able to deliver information and calculations with significantly enhanced efficiency.
“It can now be possible for us answer client questions there and then; without having to go back and re-run things at our desk, without having to arrange another meeting, without having to look at lots of different scenarios,” Patel explains. “With the system live in the room, we can simply press a few buttons and immediately show the clients the answers to their questions and the impact of those questions – and therefore progress to decision making very quickly. The fact that PFaroe is so interactive allows us to get to where we want to much faster.”
With modelling able to take place at the meetings themselves, PFaroe also facilitates greater efficiency during the meeting preparation process; removing the need to anticipate and capture potential client questions in advance, and thereby enabling more time and resources to be focused on delivering value to the portfolio.
One of the most intensive parts of the investment chain for pension funds is the construction and maintenance of liability benchmarks. Kempen therefore also uses PFaroe to drive efficiency in this area of its operations.
Patel comments: “It is an intensive, high-risk activity with extremely little margin or reward attached, so finding a solution that is much closer to the liability data than what a traditional investment model might be, was very attractive. And given PFaroe has the benefit of 35% of the UK’s liabilities on it, there are very few platforms that can match its ability to incorporate liability data.”
He concludes: “PFaroe allows us to engage with clients on a far deeper level and in a far more transparent way than a traditional fiduciary manager could. I think this not only sets apart the tool, but it sets us apart in how we are able to work with our clients.”