The number of pension schemes adopting fiduciary management has doubled since 2011, according to Aon Hewitt.
The consultant’s Delegated Investment Survey 2013 of 275 UK defined benefit (DB) pension schemes, representing around £130bn of assets, revealed 36% of respondents have appointed a delegated investment provider, up from 18% in 2011.
And the consultant predicted this trend would continue over the next few years, anticipating a 40-50% year-on-year increase in the number of schemes electing to delegate their investment strategy.
Aon Hewitt said the increase had been driven by a combination of rising scheme deficits, market volatility, increasing investment complexity and the growing number of scheme closures to new entrants and future accrual – all of which reduce the time-scale to reach a fully-funded state.
Aon Hewitt head of client solutions for delegated consulting Sion Cole (pictured) added: “Ongoing market uncertainty and volatile returns in recent years have led pension scheme trustees to consider a wider range of asset classes as they seek both to smooth funding level volatility without sacrificing returns and to align their assets more closely with their liabilities. This trend towards increased diversification has seen a marked increase in the number of schemes opting to delegate to expert providers the day-to-day investment decisions and management of their portfolios.”
Cole added: “In the last three years, 5% of all the DB schemes in the UK have moved to a fiduciary management approach. This is a remarkably quick uptake within an industry which is typically much slower to move. We believe this momentum will continue and we expect to see 25% of all UK DB pension schemes committed to delegated investment within the next five years.”
Elsewhere, the survey found 59% of respondents said their schemes now have flight plans and it revealed increased levels of diversification among schemes, with 63% of respondents holding five or more different asset classes, up from 32% in 2012.
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