If asset managers thought they were in for a warm welcome at the National Association of Pension Funds investment conference in Edinburgh, they were mistaken.

It was not just the icy winds and plunging temperatures that caused a chill in the Edinburgh air; trustees and consultants took a distinctly frosty approach to fund managers, criticising their methods, models and motivation.

It was the first time in several years that asset management teams appeared not to outnumber the trustee contingent in the conference halls. But, across the three days of the conference, investment consultants took to the stage and laid bare what they saw to be fund managers’ shortcomings.

Meanwhile pension scheme trustees, instead of clamouring to invest in the latest hot, new asset class promising uncorrelated returns, questioned whether these options were really what they wanted.

Paul Trickett, head of the Europe, Middle East and Africa investment business at Towers Watson said managers were egocentric and launched funds to satisfy their creative urges rather then match their clients’ liabilities. He said: “Trustees have lost faith in asset managers – too many agents operate to favour their own issues and often charge too high fees.”

Nicola Ralston, director at PiRho investment consulting, zeroed in on fixed-income managers. She urged trustees to quiz them about their performance records and investment processes. She accused fixed-income managers of disguising their true return rate when marketing funds and even warned that, unbeknown to trustees, many absolute bond funds were invested in complex derivative structures rather than real securities in order to reach their Libor-plus targets. She was also critical of hefty fees.

Infrastructure funds were caught by the general wave of criticism in a session when David Brief, chief investment officer of the BAE pension schemes, said he had issues with investing in the asset class through a fund structure. He said that despite infrastructure being well matched to pension scheme liabilities, the nature of investing in a fund did not give a matching time horizon to a pension scheme’s liabilities.

The overall feeling of the conference was that trustees had been taking stock of what had happened over the past 18 months and considering their options, according to Ian McKnight, investment strategy manager at the Royal Mail Pension Plan. He said: “In the current environment of low yields and meagre returns, trustees are rightly nervous of making the next move.

“Since the crisis, they have a much better understanding of their risks and are looking to asset managers for innovative solutions.”

Michael Johnson, senior consultant at Hewitt Associates, said he, too, had noticed a critical slant to the industry’s treatment at the conference. But he said asset managers should not shoulder all the blame for the current, dire levels of pension funding.

He said: “There has been a change in culture since the boom days when trustees, and consultants, did not focus enough on what they needed to achieve. Now they are clearer on their objectives; but what is on offer from asset managers is not quite there yet. It is up to them, along with consultants and their clients, to come up with solutions.”

Ray Martin, chairman of the NAPF investment council said the association had not intended that asset managers should be hauled over the coals at the conference, but agreed as a community they should improve their understanding of clients’ needs.

Martin said: “When the crisis hit, client service managers were the first to be cut, maybe they are still speaking to clients, but there are just fewer of them to do it.”

David Curtis, a vice-president of UK institutional business at Goldman Sachs Asset Management, said asset managers had taken criticism at the conference, but the points raised were indicative of the wider issue: “We have seen further evidence of a trend that the pensions industry is moving towards fiduciary methods, and a more holistic way of managing assets and liabilities, rather than opting for asset management products arbitrarily.”

But asset managers were always expecting this conference to be challenging. The conference programme provided a sign that trustees’ philosophy towards investing has changed: whereas in the past, most of the breakout seminars would have been devoted to specific asset classes, giving fund managers an opportunity to show off, only six of this year’s 21 breakout seminars were dedicated to such discussions. The organisers preferred to concentrate on risk mitigation, scheme governance and investor engagement.

Asset management companies seemed to have taken the hint. Gone were the high-profile, expensive campaigns. IShares and Legal & General Investment Management – both passive managers – were the only pure asset management companies to have bought a stand this year. Pictet, JP Morgan and Northern Trust were among the few to put in an appearance in the conference hall, but the staff talking to prospective and existing clients were skewed towards their custody offerings.

Moreover, and unlike previous years, the take-up of what was on offer was also poor. Few trustees ventured to the stands, preferring to take coffee with colleagues. A couple of delegates carried Legal & General Investment Management umbrellas towards the end of the week – but perhaps that reflected fear of the gathering dark clouds.

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